Exhibit B-1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
dated as of May 8, 2000
By and Between
AGL RESOURCES INC.,
as Buyer
and
CONSOLIDATED NATURAL GAS COMPANY,
as Seller,
VIRGINIA NATURAL GAS, INC., and
DOMINION RESOURCES, INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1 CERTAIN DEFINITIONS..............................................1
ARTICLE 2 PURCHASE AND SALE OF VNG STOCK...................................9
Section 2.1 Purchase and Sale of Stock................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER AND DRI................14
Section 3.1 Organization and Corporate Power.........................14
Section 3.2 Authorization; Validity..................................14
Section 3.3 Organization, Qualification and Corporate Power of VNG...15
Section 3.4 No Conflict..............................................15
Section 3.5 Capital Stock............................................16
Section 3.6 Financial Statements.....................................17
Section 3.7 Compliance with Law; Proceedings.........................17
Section 3.8 Tax Matters..............................................19
Section 3.9 Material Contracts.......................................21
Section 3.10 Consents and Approvals...................................22
Section 3.11 Brokers..................................................22
Section 3.12 Labor Matters............................................22
Section 3.13 ERISA....................................................23
Section 3.14 Events Subsequent to December 31, 1999...................25
Section 3.15 Title to Properties......................................27
Section 3.16 Insurance................................................28
Section 3.17 Transactions with Certain Persons........................28
Section 3.18 Compliance With Environmental Laws.......................28
Section 3.19 Intellectual Property....................................29
Section 3.20 Disclosure...............................................30
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER.........................30
Section 4.1 Organization and Corporate Power.........................30
Section 4.2 Authorization of Agreement; Validity.....................31
Section 4.3 No Conflict..............................................31
Section 4.4 Consents and Approvals...................................32
Section 4.5 Brokers..................................................32
Section 4.6 Availability of Funds....................................32
Section 4.7 Investment...............................................32
Section 4.8 Litigation...............................................32
ARTICLE 5 ACCESS; ADDITIONAL AGREEMENTS...................................33
Section 5.1 Access to Information; Continuing Disclosure.............33
Section 5.2 Regulatory Approvals.....................................34
Section 5.3 Further Assurances.......................................35
Section 5.4 Certain Tax Matters......................................36
Section 5.5 Conduct of Business of VNG...............................40
Section 5.6 Notice of Changes........................................43
Section 5.7 Director and Officer Indemnification and Insurance.......43
Section 5.8 Employee Matters.........................................44
Section 5.9 WARN Act.................................................56
Section 5.10 Satisfaction of Debt.....................................56
Section 5.11 Related Agreements.......................................57
ARTICLE 6 CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS.....................58
Section 6.1 No Injunction............................................58
Section 6.2 Representations and Warranties...........................59
Section 6.3 Performance..............................................59
Section 6.4 Approvals and Filings....................................59
Section 6.5 No Material Adverse Change...............................60
ARTICLE 7 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER...............60
Section 7.1 No Injunction............................................60
Section 7.2 Representations and Warranties...........................61
Section 7.3 Performance..............................................61
Section 7.4 Approvals and Filings....................................61
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ARTICLE 8 CLOSING.........................................................62
Section 8.1 Time and Place...........................................62
Section 8.2 Deliveries. At the Closing:.............................62
ARTICLE 9 TERMINATION AND ABANDONMENT.....................................63
Section 9.1 Methods of Termination...................................63
Section 9.2 Procedure Upon Termination and Consequences..............65
ARTICLE 10 INDEMNIFICATION.................................................66
Section 10.1 Remedies.................................................66
Section 10.2 Indemnity Claims.........................................67
Section 10.3 Notice of Claim..........................................69
Section 10.4 Defense..................................................69
Section 10.5 Limitations..............................................70
ARTICLE 11 MISCELLANEOUS...................................................71
Section 11.1 Amendment and Modification...............................71
Section 11.2 Waiver of Compliance.....................................71
Section 11.3 Notices..................................................71
Section 11.4 Binding Nature; Assignment...............................73
Section 11.5 Entire Agreement.........................................73
Section 11.6 Expenses.................................................74
Section 11.7 Press Releases and Announcements; Disclosure.............74
Section 11.8 Acknowledgment...........................................74
Section 11.9 Disclaimer Regarding Assets..............................75
Section 11.10 Governing Law............................................75
Section 11.11 Counterparts.............................................76
Section 11.12 Interpretation...........................................76
EXHIBITS
Exhibit 5.11.1 - Form of Transition Services Agreement
Exhibit 5.11.2 - Form of Software License Agreement
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SCHEDULES
Schedule 1A - Knowledge
Schedule 2.1.2 - Working Capital Methodologies
Schedule 3.3 - Equity Interests
Schedule 3.4 - Conflicts
Schedule 3.7 - Compliance with Law; Litigation
Schedule 3.8 - Tax Matters
Schedule 3.9 - Material Contracts
Schedule 3.10 - Seller Consents and Approvals
Schedule 3.13 - ERISA; Employee Plans
Schedule 3.14 - Events Subsequent to December 31, 1999
Schedule 3.15 - Permitted Liens
Schedule 3.16 - Insurance
Schedule 3.17 - Transactions with Certain Persons
Schedule 3.18.1 - Compliance with Environmental Laws
Schedule 3.18.2 - MGP Sites
Schedule 3.19 - Intellectual Property
Schedule 4.4 - Buyer Consents and Approvals
Schedule 4.8 - Buyer Litigation
Schedule 5.8.1 - Associated Seller Employees
Schedule 5.8.4 - List of Employee Benefit Plans for which VNG/Buyer
has Responsibility Following Closing
Schedule 6.4 - Required Seller Consents and Approvals
Schedule 7.4 - Required Buyer Consents and Approvals
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of May 8, 2000 (this "Agreement")
is made by and among AGL Resources Inc., a Georgia corporation ("Buyer"),
Consolidated Natural Gas Company, a Delaware corporation ("Seller"), Virginia
Natural Gas, Inc., a Virginia corporation ("VNG") (with VNG being a party to
this Agreement solely for the purposes of Sections 2.1.4, 5.3, 5.4, 5.5, and
6.3), and Dominion Resources, Inc., a Virginia corporation ("DRI") (with DRI
being a party to this Agreement solely for the purposes of Sections 2.1.4,
3.1.2, 3.2.2, 5.4, 5.11.3, and Article 10).
RECITALS
A. Seller owns all of the issued and outstanding shares of VNG Stock (as
defined herein).
B. Buyer desires to purchase from Seller, and Seller desires to sell to
Buyer, subject to the terms and conditions of this Agreement, all of the issued
and outstanding shares of VNG Stock owned by Seller.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
CERTAIN DEFINITIONS
For the purposes of this Agreement, the following words and phrases shall
have the following meanings:
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities,
obligations, Taxes, liens, losses, expenses, and fees including court costs and
reasonable attorneys' fees and expenses.
"Advisors" has the meaning set forth in Section 11.8.2.
"Affiliate" means any Person in control or under control of, or under
common control with, another Person. For purposes of the foregoing, "control",
with respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of such
Person, whether through ownership of voting securities or by contract or
otherwise.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Agreement to Hold Separate" means the Federal Trade Commission's Order of
November 4, 1999 in FTC File No. 991-0244 and Docket No. C-3901.
"Allocation" has the meaning set forth in Section 2.1.4.
"Applicable Law" has the meaning set forth in Section 2.1.4.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which commercial banking institutions in Norfolk, Virginia are authorized or
obligated by law or executive order to be closed.
"Buyer" has the meaning set forth in the first paragraph of this Agreement.
"Buyer's Auditors" means Deloitte & Touche LLP.
"Claim" has the meaning set forth in Section 5.7.1.
"Closing" has the meaning set forth in Section 8.1.
"Closing Date" has the meaning set forth in Section 8.1.
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"Code" means the Internal Revenue Code of 1986, as amended. All citations
to the Code or to the regulations promulgated thereunder shall include any
amendments or any substitute or successor provisions thereto.
"Collective Bargaining Agreement" has the meaning set forth in Section
3.12.
"Common Parent" means either DRI or Seller, or both, as the case may be.
"Common Stock" means the common stock, no par value, of VNG.
"Confidentiality Agreement" has the meaning set forth in Section 5.1.
"Contract" means a contract, note, bond, mortgage, indenture, instrument or
other obligation.
"Determination Date" has the meaning set forth in Section 5.4.8.
"DOJ" has the meaning set forth in Section 5.2.1.
"DRI" has the meaning set forth in the introductory paragraph.
"Employee Plan" means all of the employee benefit plans, policies, programs
and arrangements (including, without limitation, (i) all deferred compensation,
retirement, early retirement, savings and other pension plans, policies,
programs and arrangements, whether or not qualified under the Code (ii) all
health, severance, insurance, disability and other employee welfare plans,
policies, programs and arrangements; and (iii) all employment, incentive, stock
option, stock appreciation, stock purchase, vacation and other similar plans,
programs, policies and arrangements), whether or not subject to ERISA and
whether covering one person or more than one person, that are maintained by VNG
or any ERISA Affiliate with respect to VNG Employees, directors or independent
contractors or to which VNG or any ERISA Affiliate contributes on behalf of VNG
Employees, directors or independent contractors.
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"Environmental Condition" means any condition relating to or originating
from a Release of a Hazardous Substance at any of the Manufactured Gas
Facilities (regardless of whether such condition is on or off the Manufactured
Gas Facilities) by Seller, VNG or any of their Affiliates or any other Person.
"Environmental Laws" means all applicable Federal, state and local laws and
regulations, including common law, relating to pollution or protection of the
environment or natural resources, including laws relating to Releases or
threatened Releases of Hazardous Substances (including, without limitation,
Releases to ambient air, surface water, groundwater land and surface and
subsurface strata) or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, Release, transport, disposal or handling
of Hazardous Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any other Person that, together with VNG, is
required to be treated as a single employer under Section 414 of the Code or
Section 4001(a)(14) of ERISA.
"Estimated Purchase Price" has the meaning set forth in Section 2.1.2.
"Final Allocation" has the meaning set forth in Section 2.1.4.
"Final Working Capital Schedule" has the meaning set forth in Section
2.1.3.
"Financial Statements" has the meaning set forth in Section 3.6.
"FTC" has the meaning set forth in Section 5.2.
"Hazardous Substance" shall mean any substance, material, product,
derivative, compound, mixture, mineral, chemical, waste, medical waste or gas
(excluding natural gas), defined or included within the definition of a
"hazardous substance," "hazardous waste," "hazardous material," "toxic
chemical," "toxic substance," "hazardous chemical," "extremely
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hazardous substance," "pollutant," "contaminant," or any other words of similar
meaning within the context used under any Environmental Law.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Intellectual Property" has the meaning set forth in Section 3.19.
"Joint Use Pipeline" means that portion of the natural gas pipeline
facilities whose construction, ownership and operation by VNG was authorized by
the Virginia State Corporation Commission in Case Nos. PUE860065, PUE900038,
PUE910071, PUE950001 and PUE950002 that begins at an intersection with the
interstate natural gas transmission facilities of CNG Transmission Company at a
point on the boundary line of Fauquier and Prince Xxxxxxx Counties, Virginia and
runs south and east through Fauquier, Stafford, Spotsylvania, Xxxxxxxx, Henrico
and Hanover Counties, Virginia and terminates at an intersection in southern
Hanover County, Virginia with the natural gas pipeline facilities of Virginia
Electric and Power Company and the gas distribution facilities of VNG, the
location of which Joint Use Pipeline is shown more particularly on certificates
of public convenience and necessity Nos. GT-63, GT-66, GT-62, GT-59A, GT-61A and
GT-60.
"Knowledge" or words to such effect mean, with respect to any Person, the
actual knowledge of such Person (or, in the case of any Person that is not an
individual, the actual knowledge without independent investigation of the
executive officers of such Person listed on Schedule 1A). In all instances in
this Agreement, the term "Seller's Knowledge" or "to the Knowledge of Seller"
shall be deemed to include the Knowledge of VNG.
"Liens" means liens, charges, restrictions, claims or encumbrances of any
nature.
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"Loss" has the meaning set forth in Section 10.1.
"Manufactured Gas Facilities" means (a) the former Manufactured Gas Plant
("MGP") site located in the City of Norfolk, VA at the intersection of Virginia
Beach Blvd. and Monticello Avenue; (b) the former MGP site located in the City
of Newport News that is currently under an entrance ramp of Interstate Highway
Route 664; (c) the MGP waste storage site in the City of Chesapeake, VA adjacent
to VNG's propane-air peak-shaving plant site; (d) the former MGP waste storage
site located in the City of Suffolk, VA at the intersection of Hill Street and
Central Avenue; and (e) any other facility at which VNG or its predecessors
owned or operated a manufactured gas facility or manufactured gas waste storage
site.
"Material" or "materially" means, when used with respect to VNG, material
to VNG, taken as a whole, and when used with respect to Buyer, material to
Buyer, taken as a whole.
"Material Adverse Effect" means an effect, whether resulting from events,
actions, inactions, or circumstances, which when taken individually or in
combination with other like events, actions, inactions, or circumstances, is
materially adverse to the business, assets, condition (financial or otherwise)
or results of operations of VNG, taken as a whole.
"Material Contracts" means each Contract to which VNG is a party or by
which it or any of its property may be bound and which, in each case, is
material to VNG taken as a whole.
"Material Encumbrances" means, with respect to a material asset, any liens,
charges, restrictions, claims or encumbrances of any nature, materially adverse
to VNG's use of that asset.
"Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.
"PBGC" has the meaning set forth in Section 3.13.4.
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"Permitted Liens" has the meaning set forth in Section 3.15.
"Person" means and includes an individual, a partnership, a joint venture,
a corporation, a union, a limited liability company, a trust, an unincorporated
organization, a government or any department or agency thereof, or any other
separate legal entity recognized pursuant to law.
"Preliminary Working Capital Schedule" has the meaning set forth in Section
2.1.3.
"Purchase Price" has the meaning set forth in Section 2.1.2.
"Reasonable efforts" means commercially reasonable efforts.
"Related Company Employees" has the meaning set forth in Section 5.8.1.
"Release" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping or disposing into
the environment (including the abandonment or discarding of barrels, containers
or other closed receptacles containing any Hazardous Substance), but not
including any such action which results in exposure to persons solely within a
workplace with respect to a claim which such persons may assert against the
employer of such persons or emissions from the engine exhaust of a motor
vehicle, rolling stock, aircraft, vessel or pipeline pumping station engine.
"Section 338(h)(10) Elections" has the meaning set forth in Section 5.4.8.
"Seller" has the meaning set forth in the first paragraph of this
Agreement.
"Seller's Auditors" means PricewaterhouseCoopers, LLP.
"Subsidiary" of a Person means (i) any corporation, association or other
business entity of which 50% or more of the total voting power of shares or
other voting securities outstanding thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more of the other Subsidiaries
of that Person (or a combination thereof) and (ii) any partnership or
7
limited liability company a general partner or managing member of which is such
Person or one or more of the other Subsidiaries of such Person (or any
combination thereof).
"Supplemental Agreement" has the meaning set forth in Section 10.1.1.
"Taxes" mean all federal, state, local, foreign and other net income, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, lease, service, service use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property, windfall profits, fuel, gas
import, customs, duties or other taxes, fees, assessments or charges of any kind
whatsoever imposed by any governmental entity, together with any interest and
any penalties, additions to tax or additional amounts with respect thereto, and
the term "Tax" means any one of the foregoing Taxes.
"Tax Return" means any return, declaration, report, statement or other
document required to be filed in respect of Taxes.
"Title IV Plan" has the meaning set forth in Section 3.13.4.
"U.S. GAAP" means accounting principles generally accepted in the United
States as of a given date.
"VNG" has the meaning set forth in the introductory paragraph.
"VNG Employees" means (i) all current employees of VNG or Related Company
Employees; (ii) all employees of VNG or Related Company Employees who are absent
from work on account of vacation, disability, layoff, leave of absence or for
any other reason on the Closing, whether or not they return to active employment
after the Closing, whose last day of active employment was with VNG or as a
Related Company Employee; and (iii) all persons who retired or whose employment
with VNG terminated for any reason before the Closing.
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"VNG Stock" means all of the issued and outstanding shares of capital stock
of VNG.
"WARN Act" has the meaning set forth in Section 5.9.
"Working Capital" has the meaning set forth in Section 2.1.2.
ARTICLE 2
PURCHASE AND SALE OF VNG STOCK
Section 2.1 Purchase and Sale of Stock.
2.1.1 Transfer of VNG Stock. Upon the terms and subject to the conditions
set forth below, at the Closing Seller shall sell, convey, transfer, assign, and
deliver to Buyer, and Buyer shall purchase from Seller, all of the VNG Stock.
2.1.2 Purchase Price. The consideration to be paid for the VNG Stock (the
"Purchase Price") shall be $ 550,000,000 plus the amount by which the book value
of the Working Capital of VNG on the Closing Date exceeds $21,888,000, or minus
the amount by which the book value of such Working Capital is less than
$21,888,000. The term "Working Capital" as used herein shall mean current assets
less current liabilities determined in accordance with U.S. GAAP; provided,
however, that for the purposes of this definition, current liabilities as of any
date shall not include any payables to any Affiliates of VNG including amounts
borrowed as of such date by VNG from the "System Money Pool" described in Note
13 to the 1999 audited VNG financial statements, and current assets shall not
include receivables from any Affiliates of VNG. The computation of Working
Capital as of December 31, 1999 is set forth on Schedule 2.1.2. At the Closing,
Buyer will pay Seller an amount (the "Estimated Purchase Price") determined by
Seller's Auditors on the basis hereinabove set forth using the unaudited balance
sheet of VNG for the end of the month immediately preceding the Closing, subject
to such adjustments to reflect known variances in Working Capital as may be
mutually agreeable to the
9
parties. The Estimated Purchase Price shall be paid by wire transfer of
immediately available funds to an account designated by Seller.
2.1.3 Adjustment to the Estimated Purchase Price.
(a) As promptly as practical, but in no event more than 60 days after the
Closing, Buyer shall cause Buyer's Auditors to prepare and deliver to Seller a
draft of a schedule of the Working Capital of VNG (in the format consistent with
Schedule 2.1.2) as of the commencement of business on the Closing Date (the
"Preliminary Working Capital Schedule"), which shall reflect the value of the
Working Capital as of such date, together with a draft of their report stating,
without qualification, that the Preliminary Working Capital Schedule has been
prepared in conformity with U.S. GAAP.
(b) Seller's Auditors may, if Seller so elects, review the manner in which
Buyer's Auditors plan to prepare the Preliminary Working Capital Schedule,
including, but not limited to, the nature and extent of the procedures to be
applied in preparing the schedule. Seller and Seller's Auditors shall be
entitled to observe the taking of the physical inventory, if any.
(c) During the 15 days following the receipt by Seller of the draft of the
Preliminary Working Capital Schedule and the report of Buyer's Auditors with
respect thereto, Seller's Auditors shall be permitted to review the working
papers of Buyer's Auditors relating to the draft of the Preliminary Working
Capital Schedule and shall have such access to Buyer's personnel as may be
reasonably necessary to permit them to review in detail the manner in which the
draft was prepared. Buyer and Buyer's Auditors shall cooperate with Seller and
Seller's Auditors in facilitating such review. Seller's Auditors shall give any
comments or
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objections they have with respect to the draft of the Preliminary Working
Capital Schedule to Buyer and Buyer's Auditors. Such comments or objections,
insofar as they relate to the valuation of any assets or liabilities, shall be
resolved by Buyer, and Buyer's Auditors shall prepare a final schedule of
Working Capital (the "Final Working Capital Schedule") which shall reflect such
resolution, and deliver it to Seller pursuant to the provisions of the next
paragraph.
(d) Within seven days after the expiration of such 15 day period, Buyer
shall deliver to Seller the Final Working Capital Schedule accompanied by a
definitive report of Buyer's Auditors with respect thereto. Within three
Business Days after receipt of such schedule and report, Seller's Auditors shall
deliver a letter to Seller and Buyer stating whether they concur with such
report and their exceptions thereto, if any, together with the reasons therefor.
If Seller's Auditors fail to deliver to Seller and Buyer a letter within such
period, Seller shall be deemed to have accepted the Final Working Capital
Schedule. If the objections raised in a timely submitted letter from Seller's
Auditors cannot be resolved between Buyer's Auditors and Seller's Auditors
within five Business Days after delivery of such letter by Seller's Auditors,
the question or questions in dispute shall then be promptly submitted to any
"big five" accounting firm (other than Seller's Auditors and Buyer's Auditors),
or if such accounting firm cannot or refuses to serve in such capacity, a
mutually acceptable firm of independent public accountants of recognized
standing, the decision of which as to such question or questions in dispute
shall be final and binding upon Seller and Buyer. The accounting firm shall be
instructed to resolve the question or questions in dispute within 20 days of
submission.
(e) If the Final Working Capital Schedule, after the resolution of all
disputes, indicates that the amount of Working Capital of VNG used to determine
the Estimated
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Purchase Price was less than the amount of Working Capital of VNG reflected in
the Final Working Capital Schedule, Buyer shall promptly pay to Seller, in
immediately available funds the amount of the difference. If the Final Working
Capital Schedule, after the resolution of all disputes, indicates that the
amount of Working Capital of VNG used to determine the Estimated Purchase Price
exceeded the amount of Working Capital of VNG reflected in the Final Working
Capital Schedule, Seller shall promptly pay to Buyer, in immediately available
funds the amount of such excess.
(f) The fees of Buyer's Auditors incurred in connection with the
preparation of the Preliminary and Final Working Capital Schedules shall be
borne by Buyer, and the fees of Seller's Auditors incurred in connection with
their review of the work done in connection with the preparation of such
schedules shall be borne by Seller. The fees of any independent accounting firm
appointed pursuant to Section 2.3(d) shall be borne equally by Seller and Buyer.
2.1.4 Allocation of Purchase Price. In the event that a Section 338(h)(10)
Election is made pursuant to Section 5.4.8, Buyer and Seller agree that the
Purchase Price and the liabilities of VNG (plus other relevant items) will be
allocated to the assets of VNG for federal income tax purposes in accordance
with the Final Allocation. Buyer shall deliver to Seller at Closing a
preliminary allocation of the Purchase Price and liabilities (plus other
relevant items) among the assets of VNG, and, as soon as possible following the
Closing (but in any event within 90 days following the completion of the
adjustments to the Purchase Price contemplated by Section 2.1.3), Buyer shall
prepare and deliver to Seller a final allocation of the Purchase Price and
liabilities (plus other relevant items), reflecting all adjustments to the
12
Purchase Price contemplated by Section 2.1.3, among the assets of VNG (the
"Allocation"). The Allocation shall be consistent with Section 1060 of the Code
and the Treasury Regulations thereunder. Seller hereby agrees to accept Buyer's
Allocation unless Seller determines that such Allocation was not prepared in
accordance with Section 1060 of the Code and the regulations thereunder
("Applicable Law"). If Seller so determines, Seller shall within 20 days
thereafter propose any changes necessary to cause the Allocation to be prepared
in accordance with Applicable Law. Within 10 days following delivery of such
proposed changes, Buyer shall provide Seller with a statement of any objections
to such proposed changes, together with a reasonably detailed explanation of the
reasons therefor. If Buyer and Seller are unable to resolve any disputed
objections within 10 days thereafter, such objections shall be referred to a
"Big 5" accounting firm mutually agreeable to them (other than Seller's Auditors
and Buyer's Auditors) or if such accounting firm cannot or refuses to serve in
such capacity, a mutually acceptable firm of independent public accountants of
recognized standing, whose review shall be limited to whether Buyer's Allocation
of such disputed items regarding the Allocation was prepared in accordance with
Applicable Law. Such accounting firm shall be instructed to deliver to Seller
and Buyer a written determination of the proper allocation of such disputed
items within 20 days. Such determination shall be conclusive and binding upon
the parties hereto for all purposes, and the Allocation shall be so adjusted
(the Allocation, including the adjustment, if any, to be referred to as the
"Final Allocation"). Seller and Buyer shall share fees and disbursements of the
accounting firm attributable to the Allocation equally. Each of Seller and Buyer
agrees to timely file Internal Revenue Service Form 8594, and all federal,
state, local and foreign Tax Returns (including amended returns and claims for
refund) in a manner consistent with the Final
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Allocation. Each of Buyer and Seller agrees to promptly provide the other with
any additional information and reasonable assistance required to complete Form
8594, or compute Taxes arising in connection with (or otherwise affected by) the
transactions contemplated hereunder. Each of Seller and Buyer shall timely
notify the other, and each shall timely provide the other with reasonable
assistance in the event of an examination, audit or other proceeding regarding
the Final Allocation.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER AND DRI
Seller hereby represents and warrants to Buyer and, with respect to
Sections 3.1.2 and 3.2.2 only, DRI hereby represents and warrants to Buyer, as
follows:
Section 3.1 Organization and Corporate Power.
3.1.1 Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has full corporate power
and authority to own the VNG Stock, to execute, deliver and perform this
Agreement, and to perform all of the transactions contemplated hereby.
3.1.2 DRI is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Virginia and has full corporate
power and authority to execute, deliver and perform this Agreement, and to
perform all of the transactions contemplated hereby to be performed by it.
Section 3.2 Authorization; Validity.
3.2.1 The execution, delivery and performance by Seller of this Agreement
and the transactions contemplated hereby have been duly authorized by all
requisite corporate action on the part of Seller. This Agreement has been duly
executed and delivered by Seller and
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constitutes the valid and binding obligation of Seller, enforceable against
Seller in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect relating to creditors' rights generally, and general
equitable principles (whether considered in a proceeding in equity or at law).
3.2.2 The execution, delivery and performance by DRI of this Agreement and
the transactions contemplated hereby have been duly authorized by all requisite
corporate action on the part of DRI. This Agreement has been duly executed and
delivered by DRI and constitutes the valid and binding obligation of DRI,
enforceable against DRI in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect relating to creditors' rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at law).
Section 3.3 Organization, Qualification and Corporate Power of VNG. VNG is
a corporation duly organized, validly existing and in good standing under the
laws of the Commonwealth of Virginia, and is duly licensed or qualified to
transact business as a foreign corporation in each jurisdiction in which the
nature of the business transacted by it or the character of the properties owned
or leased by it requires such licensing or qualification. VNG has full corporate
power and authority to own, lease or otherwise hold its properties and assets
and to carry on its business as now conducted. Except as set forth on Schedule
3.3, VNG does not own any equity interest in any other entity, excluding de
minimis interests received as a result of bankruptcy proceedings.
15
Section 3.4 No Conflict. The execution, delivery and performance by Seller
of this Agreement and the consummation by Seller of the transactions
contemplated hereby will not (i) violate, conflict with or result in a breach of
any provisions of the certificate or articles of incorporation, by-laws or
articles of organization of Seller or VNG, (ii) violate any material law or
regulation applicable to Seller or VNG, or any order of any court or
governmental agency or authority having jurisdiction over Seller or VNG, (iii)
except as set forth in Schedule 3.4, violate or conflict with, or constitute
(with due notice or lapse of time or both) a default under, any Material
Contract or (iv) result in the creation or imposition of any Material
Encumbrance.
Section 3.5 Capital Stock.
3.5.1 Seller owns of record and beneficially good and valid title to all of
the authorized, issued and outstanding capital stock of VNG, consisting of 5,273
shares of Common Stock. There are (i) no authorized or outstanding
subscriptions, warrants, options, convertible securities or other similar
securities or rights (contingent or otherwise) to purchase or otherwise acquire
from VNG or Seller any equity interests of or in VNG, (ii) no commitments on the
part of VNG or Seller to issue shares, subscriptions, warrants, options,
convertible securities, partnership interests or other similar securities or
rights with respect to the equity securities of VNG, and (iii) no equity
securities of VNG reserved for issuance for any such purpose. Neither Seller nor
VNG has any obligation (contingent or other) to purchase, redeem or otherwise
acquire or sell any equity securities of VNG. Except for this Agreement, there
is no lien, restriction, claim, charge, option, voting trust or agreement,
stockholders agreement, pledge agreement, buy-sell agreement, right of first
refusal, preemptive right, proxy, or encumbrance on
16
or relating to any equity securities of VNG. None of the shares of VNG Stock
have been issued in violation of the preemptive rights of any Person or of any
applicable securities law.
3.5.2 All shares of VNG Stock have been and at the Closing will be duly
authorized, validly issued, fully paid and nonassessable. Upon the conveyance
and transfer of the VNG Stock to Buyer, Buyer shall receive good and valid title
thereto, free and clear of all liens, claims, equities, charges, options, rights
of first refusal, encumbrances, or other restrictions and with no defects of
title.
Section 3.6 Financial Statements. Seller has delivered to Buyer an audited
balance sheet of VNG at December 31, 1998 and 1999 and related audited
statements of income and cash flows of VNG for the years then ended (such
statements, together with the related notes thereto, collectively, the
"Financial Statements"). The Financial Statements have been prepared in
accordance with U.S. GAAP consistently applied, and fairly present in all
material respects the financial condition of VNG as of the dates thereof and the
results of operations for the periods covered thereby. VNG has no liability or
obligation (whether accrued, absolute, contingent or otherwise) which,
individually or in the aggregate, is material to VNG, other than (i) liabilities
reflected (but only to the extent so reflected) or reserved (but only to the
extent so reserved) against in the Financial Statements, (ii) liabilities or
obligations that have arisen since December 31, 1999 in the ordinary course of
business, none of which, individually or in the aggregate, would, or would
reasonably be expected to, have a Material Adverse Effect or (iii) liabilities
or obligations disclosed in Schedule 3.6.
Section 3.7 Compliance with Law; Proceedings.
17
3.7.1 Except as set forth on Schedule 3.7, VNG is in compliance with all
laws, rules, regulations, licenses, permits and orders applicable to it and its
business (other than labor laws, which are addressed in Section 3.12, and
Environmental Laws, which are addressed in Section 3.18), except for such
non-compliance as would not, or would not reasonably be expected to, have a
Material Adverse Effect. Except as set forth on Schedule 3.7, VNG has all
permits, licenses, franchises and other governmental authorizations
(collectively, "Permits") necessary to own, lease or otherwise hold its
properties and assets and to conduct its business as currently conducted, except
where the failure to obtain the same would not, or would not reasonably be
expected to, have a Material Adverse Effect. Except as set forth on Schedule
3.7, and except as would not have, or would not reasonably be expected to have,
a Material Adverse Effect, (i) each Permit is in full force and effect in
accordance with its terms, (ii) there is no outstanding written notice, nor to
Seller's Knowledge, any other notice of revocation, cancellation or termination
of any Permit, and (iii) there are no proceedings pending or, to Seller's
Knowledge, threatened that seek the revocation, cancellation or termination of
any Permit.
3.7.2 Except as set forth on Schedule 3.7, (i) each franchise is in full
force and effect in accordance with its terms, (ii) there is no outstanding
written notice, nor to Seller's Knowledge, any other notice, of revocation,
cancellation or termination of any franchise, (iii) there are no liabilities of
VNG under any existing or expired franchise which have not been fully satisfied,
and (iv) there are no proceedings pending or, to Seller's Knowledge, threatened
that seek the revocation, cancellation or termination of any franchise.
18
3.7.3 There are no (i) actions, suits, claims or proceedings (including,
but not limited to, any arbitration proceedings) pending or, to Seller's
Knowledge, threatened, or (ii) investigations which, to Seller's Knowledge, are
pending or threatened, against VNG, at law or in equity, or before or by any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which would, or would
reasonably be expected to, have a Material Adverse Effect or which seek
specifically to prevent, restrict or delay the consummation of the transactions
contemplated hereby or the fulfillment of the conditions of this Agreement. VNG
is not in default with respect to any order, writ, injunction or decree known to
or served upon VNG of any court or of any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, except for defaults which would not, or would not
reasonably be expected to, have a Material Adverse Effect.
3.7.4 Except as set forth on Schedule 3.7, there are no rate proceedings
filed, pending or on appeal with or from the Virginia State Corporation
Commission or any other governmental authority having rate setting or approval
authority over VNG.
Section 3.8 Tax Matters.
3.8.1 There have been properly completed and filed on a timely basis and in
substantially correct form all Tax Returns required to be filed by VNG on or
prior to the date hereof. As of the time of filing, the foregoing Tax Returns
were true, correct, and complete in all material respects. Except as set forth
in Schedule 3.8, VNG is not currently the beneficiary of any extension of time
within which to file any Tax Return.
19
3.8.2 With respect to all amounts in respect of Taxes imposed on VNG for
any taxable periods or portions of periods ending on or before the Closing Date,
(i) all applicable Tax laws have been complied with, except for such
non-compliance as would not, or would not reasonably be expected to, have a
Material Adverse Effect, and (ii) all material amounts required to be paid to
taxing authorities or others on or before the date hereof have been paid, except
such Taxes, if any, as set forth in Schedule 3.8 that are being contested in
good faith.
3.8.3 Schedule 3.8 lists all federal, state, local, and foreign Tax Returns
filed with respect to VNG for taxable periods ended on or after December 31,
1997, indicates those Tax Returns that have been audited, and indicates those
Tax Returns that currently are the subject of audit. Seller has delivered to
Buyer true, correct and complete copies of all federal income Tax Returns,
examination reports, and statements of deficiencies assessed against or agreed
to by VNG (or portions of such Tax Returns, reports and statements that relate
to VNG) since December 31, 1997. Except as set forth in Schedule 3.8, no
material adjustments to the Tax liability of VNG have been proposed (and are
currently pending) by any taxing authority in connection with any such Tax
Return. All deficiencies asserted or assessments made as a result of any
examinations have been fully paid, or are fully reflected as a liability in the
financial statements of VNG, or are being contested in good faith and are
described in Schedule 3.8.
3.8.4 There are no liens for Taxes (other than for current Taxes not yet
due and payable) on any of the assets of VNG.
3.8.5 The unpaid Taxes of VNG (i) did not, as of the most recent fiscal
month end, exceed the reserve for Tax liability (other than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the most recent
20
balance sheet (other than in any notes thereto) and (ii) will not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of VNG in filing its Tax Returns.
3.8.6 VNG has not filed a consent under Code ss. 341(f) concerning
collapsible corporations. VNG has not made any payments, is not obligated to
make any payments, nor is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Code ss. 280G. VNG has not been a United States real property holding
corporation within the meaning of Code ss. 897(c)(2) during the applicable
period specified in Code ss. 897(c)(1)(A)(ii). VNG has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code ss.
6662. VNG (i) has not been a member of an affiliated group filing a consolidated
federal income Tax Return (other than a group the common parent of which was
Common Parent) or (ii) has no material liability for the Taxes of any Person
(other than VNG) as a transferee or successor, or by contract.
Section 3.9 Material Contracts. The Contracts listed in Schedule 3.9
include all of the Material Contracts; provided, however, that no Contract shall
be deemed a Material Contract solely by reason of the fact that it is listed on
Schedule 3.9. Seller has provided to Buyer true, correct and complete copies of
all contracts listed on Schedule 3.9. Except as otherwise set forth in Schedule
3.9, (i) each Material Contract is valid, binding and in full force and effect,
and is enforceable by VNG in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereinafter in effect relating to creditors' rights
generally, and general equitable principles (whether considered
21
in a proceeding in equity or at law), (ii) VNG has performed the material
obligations required to be performed by it to date under each Material Contract,
and (iii) to the Knowledge of Seller, there has not occurred any material
default by any other party under any Material Contract nor any event that with
or without the giving of notice or lapse or time, or both, would constitute a
material default under any Material Contract.
Section 3.10 Consents and Approvals. Except as set forth in Schedule 3.10,
no registration or filing with, or consent or approval of or other action by,
any Federal, state or other governmental agency or instrumentality or any other
Person is or will be necessary for the valid execution, delivery and performance
by Seller of this Agreement or the consummation of the transactions contemplated
hereby, other than filings required pursuant to the HSR Act.
Section 3.11 Brokers. Neither Seller nor any Subsidiary or Affiliate
thereof has any contract, arrangement or understanding with any investment
banking firm, broker or finder with respect to the transactions contemplated by
this Agreement, except for Xxxxxxx Xxxxx, whose fees shall be borne by Seller.
Section 3.12 Labor Matters. Seller has delivered to Buyer a true and
correct copy of the collective bargaining agreement dated May 16, 1997 between
VNG and the Virginia Natural Gas Employees of Local 50 of the International
Brotherhood of Electrical Workers (together with any amendments thereto, the
"Collective Bargaining Agreement"). The Collective Bargaining Agreement
constitutes the only collective bargaining agreement to which VNG is a party or
is subject. VNG (i) is in compliance with all applicable laws regarding
employment and employment practices, terms and conditions of employment, and
wages and hours, (ii) has not received written notice of any unfair labor
practice complaint against it pending before the
22
National Labor Relations Board; (iii) has no arbitration proceeding pending
against it that arises out of or under any collective bargaining agreement which
relates to the business or operations of VNG, and (iv) is not currently
experiencing, and has received no current threat of, any work stoppage, in each
case of (i) through (iv), except as would not, or would not reasonably be
expected to, have a Material Adverse Effect.
Section 3.13 ERISA.
3.13.1 Schedule 3.13 lists all Employee Plans. Neither VNG nor any of its
ERISA Affiliates has made any commitment to establish any new Employee Plan or
to modify any Employee Plan, nor has any intention to do so been communicated to
any VNG Employee. Seller has provided Buyer with true, correct and complete
copies of all plan documents and other documents relating to the Employee Plans.
Since such documents have been supplied, no amendments to any Employee Plan have
been adopted, and no such amendments will be adopted or made prior to the
Closing except to the extent Buyer consents to such amendment or modification.
3.13.2 All Employee Plans subject to ERISA and the Code comply with ERISA
and the Code in all material respects.
3.13.3 Except as set forth in Schedule 3.13, all Employee Plans intended to
be qualified under Section 401 of the Code have received favorable determination
letters with respect to such qualified status from the Internal Revenue Service.
The determination letter for each such Employee Plan remains in effect, and, to
the Knowledge of Seller, any amendment made or event relating to such an
Employee Plan subsequent to the date of such determination letter has not
adversely affected the qualified status of the Employee Plan. No issue
concerning
23
qualification of any Employee Plan is pending before or threatened by the
Internal Revenue Service.
3.13.4 Except as set forth on Schedule 3.13, no Employee Plan that is
subject to Title IV of ERISA (a "Title IV Plan") has incurred an accumulated
funding deficiency, whether or not waived, within the meaning of Section 412 of
the Code or Section 302 of ERISA, and no condition exists which would be
expected to result in an accumulated funding deficiency as of the last day of
the current plan year of any Title IV Plan. The Pension Benefit Guaranty
Corporation ("PBGC") has not instituted proceedings to terminate any Title IV
Plan, and no other event or condition has occurred which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any such Title IV Plan. Neither VNG nor any ERISA
Affiliate has withdrawn from a Title IV Plan during a plan year in which it was
a "substantial employer" (within the meaning of Section 4001(a)(2) of ERISA), or
filed a notice of intent to terminate any Title IV Plan or adopted any amendment
to treat any such plan as terminated. No notice of a reportable event (within
the meaning of ERISA Section 4043(b)) has been filed with the PBGC by the plan
administrator of any Title IV Plan, nor has any reportable event occurred for
which such a notice is required to be filed with the PBGC. All required premium
payments to the PBGC for each Title IV Plan has been paid when due.
3.13.5 No Employee Plan is a Multiemployer Plan.
3.13.6 None of the Employee Plans has engaged in or been a party to a
transaction that is prohibited under Section 4975 of the Code or Section 406 of
ERISA and which is not exempt under Section 4975 of the Code or Section 408 of
ERISA, respectively.
24
3.13.7 Except for individuals listed in Schedule 5.8.1, no VNG Employee
shall accrue or receive additional benefits, service or accelerated rights to
payment of benefits under any Employee Plan or become entitled to severance,
termination allowance or similar payments as a result of the transactions
contemplated by this Agreement.
3.13.8 Other than claims for benefits in the ordinary course, there is no
claim pending, or, to Seller's Knowledge, threatened, with respect to any
Employee Plan or any fiduciary (as defined under ERISA) under any Employee Plan.
3.13.9 VNG and its ERISA Affiliates have made full and timely payment of
all amounts required to be contributed under the terms of each Employee Plan.
3.13.10 The voluntary employee benefit association (VEBA) sponsored by VNG
has been funded in accordance with any applicable regulatory requirements set
forth by the Virginia State Corporation Commission.
3.13.11 Schedule 3.13 sets forth the pay scale for all existing VNG
Employees, and lists the number of VNG Employees in the positions denoted on
Schedule 3.13.
Section 3.14 Events Subsequent to December 31, 1999. Except as set forth in
Schedule 3.14 or as specifically and expressly identified and provided for by
this Agreement to occur prior to the Closing Date (or consented to or approved
by Buyer in writing prior to the Closing Date), since December 31, 1999, VNG has
not:
(i) incurred any indebtedness for borrowed money (not including accounts
payable and trade payables incurred in the ordinary course of business) other
than in the ordinary course consistent with past practice, indebtedness to
Affiliates which will be
25
repaid prior to Closing, and indebtedness incurred in accordance with the
express terms of any Material Contract;
(ii) acquired or disposed of, in either case in any manner, any material
assets or properties, other than acquisitions and dispositions in the ordinary
course of business, dispositions of obsolete or surplus assets, acquisitions and
dispositions in connection with the normal repair and/or replacement of assets
or properties, or property losses covered by insurance, or acquisitions or
dispositions in accordance with the express terms of any Material Contract;
(iii) amended its Certificate of Incorporation, By-laws or governing
documents;
(iv) failed to pay and discharge on a timely basis consistent with past
practices any material liabilities which constitute current liabilities under
U.S. GAAP consistently applied, except for liabilities not yet due or
liabilities which are subject to good faith contest for which appropriate
reserves have been established;
(v) cancelled any material indebtedness owed to VNG or waived any rights of
substantial value to VNG;
(vi) declared or paid any dividend or distribution in respect of the VNG
Stock;
(vii) granted any general increase in the compensation or benefits of any
VNG Employees other than normal merit or promotional increases in the normal
course of business or as required pursuant to existing contracts (including
collective bargaining agreements);
26
(viii) suffered any damage or destruction materially and adversely
affecting the assets or business of VNG taken as a whole;
(ix) made any change in any material method, practice, or principle of
financial or tax accounting;
(x) entered into any agreement or commitment to take any of the actions
described in Sections 3.14 (i) to 3.14 (ix); or
(xi) from December 31, 1999 to the date of this Agreement, suffered a
Material Adverse Effect.
Section 3.15 Title to Properties. VNG has good and valid title to the
material properties and assets reflected on the December 31, 1999 balance sheet
included in the Financial Statements or thereafter acquired (other than material
properties and assets disposed of in the ordinary course of business since such
date and dispositions that would not result in a breach of the representations
set forth in Section 3.14), free and clear of any Material Encumbrances, except
for: (i) Liens and encumbrances set forth in Schedule 3.15; (ii) Liens for
current taxes not yet due and payable or being contested in good faith through
appropriate proceedings, Liens which do not materially adversely affect the use
or value for the purpose of VNG's business of the property they encumber, Liens
to lenders incurred on deposits made in the ordinary course of business in
connection with maintaining bank accounts, Liens in the ordinary course of
business in connection with workers' compensation, unemployment insurance and
other types of social security, or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases, government
contracts, governmental permits, licenses and approvals, performance and
return-of-money bonds and other similar obligations, and (iii) materialmen's,
27
warehousemen's and mechanics Liens and other Liens arising by operation of law
in the ordinary course of business for sums not yet due. The Liens described in
the foregoing clauses (i), (ii) and (iii) are collectively referred to as
"Permitted Liens". VNG currently owns, leases or otherwise has a right to use
all of the property necessary for the conduct of its business as currently
conducted except for such property the absence of which would not, or would not
reasonably be expected to, have a Material Adverse Effect.
Section 3.16 Insurance. Schedule 3.16 lists the insurance policies
maintained by or on behalf of VNG. Seller has delivered to Buyer true, correct
and complete copies of all such insurance policies. Except as set forth in
Schedule 3.16, VNG holds, or is beneficiary of, valid policies of insurance of
such types and in such amounts as is customary for companies similarly situated.
Such policies are in full force and effect, and VNG has received no written
notice of any pending or threatened termination of such policies.
Section 3.17 Transactions with Certain Persons. Except for liabilities and
obligations arising out of their employment relationship with VNG and its
Affiliates, and except as set forth in Schedules 3.9 or 3.13, VNG has no
outstanding liabilities or obligations owing to or from any officer, director,
employee or stockholder of VNG (other than Seller or its Affiliates, which
liabilities will be satisfied as of the Closing) nor any member of any such
person's immediate family.
Section 3.18 Compliance With Environmental Laws.
3.18.1 Except as set forth in Schedule 3.18.1, (i) VNG is in material
compliance with applicable Environmental Laws, (ii) VNG has no material
liability under applicable Environmental Laws, and (iii) Hazardous Substances
have not been Released by Seller, VNG or
28
their Affiliates at any properties owned and/or operated currently or formerly
by Seller, VNG or their Affiliates, which would, or would reasonably be expected
to, result in a material Loss. Except as set forth in Schedule 3.18.1, (A) no
written notice of any material violation of Environmental Laws relating to the
operations or properties of VNG has been received by, and is pending against
VNG, and (B) there are no writs, injunctions, decrees, orders or judgments
outstanding, or any actions, suits, claims, proceedings or investigations
pending or, to the Knowledge of Seller or VNG, threatened, relating to material
non-compliance by VNG with or liability of VNG under the applicable
Environmental Laws. Except for documents, environmental studies and assessments
related to the Manufactured Gas Facilities, Seller has provided to Buyer true,
correct and complete copies of (1) all material documents related to the items
listed on Schedule 3.18.1 within the possession or control of Seller, VNG, or
their Affiliates and (2) summaries of all environmental studies and assessments
of VNG and its properties prepared since 1995 within the possession or control
of Seller, VNG or their Affiliates.
3.18.2 Except as set forth on Schedule 3.18.2 and as described in items (a)
through (d) of the definition of Manufactured Gas Facilities, neither VNG nor
its predecessors have owned or operated any facility or property which was used
as a manufactured gas plant. All manufactured gas plants of VNG and its
predecessors and sites to which Hazardous Substances or other wastes from such
manufactured gas plants are known to have been sent by Seller, VNG or their
Affiliates for storage, treatment or disposal are listed in Schedule 3.18.2.
Section 3.19 Intellectual Property. Schedule 3.19 is a complete list of all
material patents, patent applications, trademarks, service marks, tradenames,
copyrights, material
29
proprietary software, inventions and other proprietary items owned or used by
VNG in the conduct of its business (such intellectual property owned by VNG, the
"VNG Intellectual Property", and collectively with all intellectual property
used by VNG, the "Intellectual Property"). Except as set forth on Schedule 3.19,
VNG owns, possesses or has the right to exploit, free of any obligation to make
any material payment (whether of a royalty, license fee, compensation or
otherwise), the Intellectual Property, all of which are the only Intellectual
Property which are necessary to the conduct of VNG's business, other than such
Intellectual Property the absence of which would not have a Material Adverse
Effect. To the Knowledge of the Seller, VNG's ownership, possession or other use
or exploitation of any of the Intellectual Property does not conflict with the
rights of any Person. VNG has used its reasonable efforts to protect the VNG
Intellectual Property. To the Knowledge of Seller, other than as set forth on
Schedule 3.19, (i) no Person other than VNG owns or has any other right in or
to, or has claimed any ownership or other right in or to, any VNG Intellectual
Property which is material to VNG's business as currently conducted and (ii) no
Person is infringing upon any VNG Intellectual Property material to VNG's
business as currently conducted.
Section 3.20 Disclosure. Neither this Agreement (including the Schedules)
nor any documents, certificates or other items delivered to Buyer by or on
behalf of Seller or VNG in accordance with this Agreement contain any untrue
statement of a material fact or omit a material fact necessary to make each
statement contained herein or therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
30
Section 4.1 Organization and Corporate Power. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of Georgia.
Buyer has full corporate power and authority to execute, deliver and perform
this Agreement.
Section 4.2 Authorization of Agreement; Validity. The execution, delivery
and performance by Buyer of this Agreement have been duly authorized by all
requisite corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes the valid and binding obligation
of Buyer, enforceable against Buyer in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and general equitable principles (whether
considered in a proceeding in equity or at law).
Section 4.3 No Conflict. The execution, delivery and performance by Buyer
of this Agreement and the consummation of the transactions contemplated hereby
will not (i) violate the certificate of incorporation, by-laws, articles of
organization, partnership agreement, formation agreement or other similar
organizational documents of Buyer, (ii) violate any material law or regulation
applicable to Buyer, or any order of any court or governmental agency or
authority having jurisdiction over Buyer, or (iii) violate or conflict with, or
constitute (with due notice or lapse of time or both) a default or result in
acceleration under, any material note, bond, mortgage, indenture, license,
lease, contract, agreement or other instrument or obligation by which Buyer or
any of its assets is bound.
Section 4.4 Consents and Approvals. Except as set forth in Schedule 4.4, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other
31
governmental agency or instrumentality or any other Person is or will be
necessary for the valid execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated hereby, other
than filings required pursuant to the HSR Act.
Section 4.5 Brokers. Neither Buyer nor any Subsidiary or Affiliate of Buyer
has any contract, arrangement or understanding with any investment banking firm,
broker, finder or similar agent with respect to the transactions contemplated by
this Agreement, except for Xxxxxx Xxxxxxx Xxxx Xxxxxx, whose fees shall be borne
by Buyer.
Section 4.6 Availability of Funds. At the Closing, Buyer will have
sufficient funds to pay the Purchase Price and to consummate the transactions
contemplated hereby.
Section 4.7 Investment. Buyer is acquiring the VNG Stock for investment and
not with a view to its sale or distribution other than in a sale or distribution
which is registered under applicable securities laws or is exempt from such
registration.
Section 4.8 Litigation. Except as set forth in Schedule 4.8, there are no
actions, suits, claims, investigations or proceedings (legal, administrative or
arbitrative) pending or, to the Knowledge of Buyer, threatened against Buyer,
whether at law or in equity and whether civil or criminal in nature, before any
federal, state, municipal, foreign country's or other court, arbitrator,
governmental department, commission, agency or instrumentality, nor are there
any judgments, decrees or orders of any such court, arbitrator, governmental
department, commission, agency or instrumentality outstanding against Buyer,
which have or if, adversely determined, would, or would reasonably be expected
to, have a material adverse effect on Buyer's assets or its business, taken as a
whole, or which seek specifically to prevent, restrict or
32
delay the consummation of the transactions contemplated hereby or the
fulfillment of any of the conditions of this Agreement.
ARTICLE 5
ACCESS; ADDITIONAL AGREEMENTS
Section 5.1 Access to Information; Continuing Disclosure.
5.1.1 Seller agrees that from the date hereof until the Closing Date, and
subject to the terms of the Confidentiality Agreement, upon reasonable notice
from Buyer, Seller shall cause VNG to provide to Buyer reasonable access, at
reasonable times during normal business hours, to the employees, properties,
books and records of VNG and shall promptly furnish to Buyer, or cause VNG to
furnish to Buyer, information as Buyer may reasonably request; provided, that
such access shall be afforded to Buyer only in such manner so as not to
unreasonably disturb or interfere with the normal operations of VNG. Seller and
VNG shall not be required to take any action that would constitute a waiver of
the attorney-client privilege. Seller and VNG need not supply to Buyer any
information that Seller or VNG are under a legal obligation not to supply, but
shall inform Buyer of such legal obligation. At regular intervals prior to the
Closing Date, or at such other times as Buyer or its representatives shall
reasonably request, Seller shall consult with Buyer regarding the conduct of the
business of VNG. All information furnished by or on behalf of Seller or VNG
hereunder shall be subject to the terms of the Confidentiality Agreement dated
February 2, 2000 between Seller and Buyer (the "Confidentiality Agreement").
5.1.2 Seller agrees that after the Closing Date, and subject to the terms
of a commercially reasonable confidentiality agreement, upon reasonable notice
from Buyer, Seller shall provide to Buyer and VNG reasonable access, at
reasonable times during normal business
33
hours, to documents, environmental studies and assessments related to the
Manufactured Gas Facilities within the possession or control of Seller or its
Affiliates; provided, that such access shall be afforded to Buyer and VNG only
in such manner so as not to unreasonably disturb or interfere with the normal
operations of Seller and in the event that (i) Buyer or VNG receives an inquiry
from a governmental authority or otherwise needs access in order to comply with
applicable law, (ii) a third party asserts a claim against Buyer or VNG relating
in any way to the Manufactured Gas Facilities, or (iii) Buyer or VNG provides
written notice to Seller specifying any other reason for which Buyer or VNG
requests access, in which event access will be provided upon Seller's consent
(not to be unreasonably withheld). Seller shall not be required to take any
action that would constitute a waiver of the attorney-client privilege. Seller
need not supply to Buyer and VNG any information that Seller is under a legal
obligation not to supply, but shall inform Buyer and VNG of such legal
obligation. All information furnished by or on behalf of Seller or VNG hereunder
shall be subject to the terms of a commercially reasonable confidentiality
agreement.
Section 5.2 Regulatory Approvals.
5.2.1 Buyer and Seller will as promptly as practical, but in no event later
than 30 days following the execution and delivery of this Agreement, each file
with the United States Federal Trade Commission (the "FTC") and the United
States Department of Justice (the "DOJ") the Notification and Report Form under
the HSR Act, if any, required in connection with the transactions contemplated
hereby and as promptly as practicable supply any additional information, if any,
requested in connection herewith pursuant to the HSR Act. Any such Notification
and Report Form and additional information, if any, submitted to the FTC or the
34
DOJ shall be in substantial compliance with the requirements of the HSR Act.
Each of Buyer and Seller shall furnish to the other such information and
assistance as the other may reasonably request in connection with its
preparation of any filing or submission which is necessary under the HSR Act.
Each of Buyer and Seller shall keep the other apprised in a prompt manner of the
status and substance of any communications with, and inquiries or requests for
additional information from, the FTC and the DOJ and shall comply promptly with
any such inquiry or request. Each of Buyer and Seller will use its reasonable
efforts to obtain the termination or expiration of any applicable waiting period
required under the HSR Act for the consummation of the transactions contemplated
hereby. The cost of all filing fees under the HSR Act shall be borne by Buyer.
5.2.2 Each of Buyer and Seller shall as promptly as practical, but in no
event later than forty-five days following the execution and delivery of this
Agreement, submit to the appropriate agency/ies or third party/ies all
declarations, filings and registrations required of it and listed on Schedules
3.10 and 4.4. With respect to any such filings, Buyer and Seller shall cooperate
to share and develop information necessary for such filing(s) and drafts of such
filing(s) within 20 days following execution and delivery of this Agreement and
shall give each other reasonable opportunity to comment on and to revise such
draft filing(s) before such filing(s) are made.
Section 5.3 Further Assurances. From time to time from the date hereof
until the Closing Date, as and when requested by any party hereto, the requested
party shall use reasonable efforts to execute and deliver, or cause to be
executed and delivered, all such documents and instruments and shall take, or
cause to be taken, all such further or other actions
35
as reasonably necessary to consummate the transactions contemplated by this
Agreement, including, without limitation, such actions as are reasonably
necessary in connection with obtaining any third party consent identified on
Schedules 3.10 or 4.4 or any regulatory filings as any party may undertake in
connection herewith; provided, however, neither party shall be required to incur
any material economic burden or instigate litigation in order to obtain any such
third party consent. After the date hereof and prior to Closing, if requested by
Buyer, each of Buyer, Seller and VNG agree cooperatively to commence and
diligently pursue efforts to reinstate the expired Permits listed in Schedule
3.7; provided, however, neither Seller nor VNG shall be obligated to agree to
incur any economic burden or ongoing obligations (other than those contained in
the expired Permits) in order to obtain such reinstatement.
Section 5.4 Certain Tax Matters.
5.4.1 Any tax sharing agreement between Seller, or any Affiliate of Seller,
and VNG will be terminated as of the Closing Date and will have no further
effect for any taxable year (whether the current year, a future year, or a past
year).
5.4.2 Seller and DRI agree to jointly and severally indemnify Buyer from
and against the entirety of any Adverse Consequences Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any liability
of VNG for Taxes of any Person other than VNG for any periods prior to the
Closing Date (a) under Reg. ss. 1.1502-6 (or any similar provision of state,
local or foreign law), (b) as a transferee or successor, (c) by contract, or (d)
otherwise.
5.4.3 Common Parent will include the income of VNG (including any deferred
income triggered into income by Reg. ss. 1.1502-13) on Common Parent's
consolidated federal
36
income Tax Returns for all periods through the Closing Date and shall pay any
income Taxes attributable to such income. VNG will furnish Tax information to
Common Parent for inclusion in the Common Parent's federal consolidated income
Tax Return for the period which includes the Closing Date in accordance with
VNG's past custom and practice. Seller will allow Buyer an opportunity to review
and comment upon such Tax Returns (including any amended returns) to the extent
that they relate to VNG. Except as may be required by law, Seller will take no
position on such returns that relate to VNG that would adversely affect VNG
after the Closing Date, except that Seller may take positions consistent with
past practices. The income of VNG will be apportioned to the period up to and
including the Closing Date and the period after the Closing Date by closing the
books of VNG as of the end of the Closing Date.
5.4.4 Common Parent will give notice to VNG of any audit and allow VNG and
its counsel to participate at its own expense in any audits of Common Parent's
consolidated federal income Tax Returns to the extent that such returns relate
to VNG. Common Parent will not settle any such audit in a manner which would
adversely affect VNG after the Closing Date without the prior written consent of
Buyer, which consent shall not unreasonably be withheld.
5.4.5 (i) To the extent permitted by law, Buyer shall cause VNG to carry
forward any net operating losses, net capital losses, tax credits, or other tax
attributes attributable to periods after the Closing. To the extent that
applicable law requires VNG to carry back any such Tax attribute to a period
before the Closing, Common Parent shall cooperate with Buyer in the filing of
any Tax Returns necessary to effect such carryback and shall promptly upon
receipt pay to Buyer any Tax refund resulting from such carryback. Buyer agrees
to indemnify Seller for any Taxes resulting from the disallowance of such
postacquisition Tax attribute on audit or
37
otherwise. Seller may elect to reimburse Buyer for any refund that would have
resulted from any carryback in lieu of amending any Tax Return or filing any
refund claims provided in this Section 5.4.5.
(ii) Except as provided in subsection (i) of this Section 5.4.5, Common
Parent shall be entitled to all overpayments in respect of (A) any Tax Return
filed by or for VNG or any group of corporations that includes VNG for periods
ending on or before the Closing Date and (B) any Tax Return filed on a
consolidated, combined or unitary basis for a group that includes VNG for a
period that begins on or before the Closing Date and that ends after the Closing
Date. VNG shall be entitled to all refunds in respect of any Tax Return filed by
it on a separate company basis for a period that begins on or before the Closing
Date and that ends after the Closing Date, except that Common Parent shall be
entitled to any excess of (1) estimated tax or other payments made on or before
the Closing Date with respect to any such Tax Return over (2) the tax liability
that would have been due for the portion of the period covered by such Tax
Return up to and including the Closing Date, determined as if the books of VNG
were closed as of the end of the Closing Date.
5.4.6 Common Parent will not elect to retain any net operating loss
carryovers or capital loss carryovers of VNG under Reg.ss.1.1502-20(g).
5.4.7 All stamp, documentary, recording, transfer and sales and use taxes
incurred in connection with this Agreement and the transactions contemplated
hereby shall be borne by Buyer, and Buyer at its own expense shall file, to the
extent required by applicable law, all necessary Tax Returns and other
documentation with respect to all such transfer or sales and
38
use taxes. If required by applicable law, Seller shall join the execution of any
such Tax Returns or other documentation.
5.4.8 At DRI's option, as the common parent of the consolidated group which
includes VNG, DRI will join with Buyer in making an election under Section
338(h)(l0) of the Code (and any corresponding elections under state, local, or
foreign tax law) (collectively a "Section 338(h)(10) Election") with respect to
the purchase and sale of the VNG Stock hereunder. At the earliest time deemed by
DRI, in its sole discretion, to be practicable, but not later than the earliest
of (i) June 1, 2001, (ii) the end of the fifth calendar month following the
month in which the Closing shall occur, or (iii) the date on which DRI receives
an unfavorable response from the Securities and Exchange Commission or the
Internal Revenue Service which DRI determines in its sole discretion renders
pursuit of its desired tax treatment futile (such date, being the "Determination
Date"), DRI shall advise Buyer whether DRI will join Buyer in such request. DRI
shall cooperate with Buyer with regard to the preparation of Internal Revenue
Service Form 8023 in order that such Form 8023 can be filed in a timely manner,
provided that such cooperation by DRI prior to DRI's assent to joining Buyer in
making the Section 338(h)(10) Election shall not be construed as such assent. If
DRI elects to join Buyer in making the Section 338(h)(10) Election, DRI will pay
any Tax attributable to the making of the Section 338(h)(10) Election and will
indemnify Buyer and VNG against any Adverse Consequences arising out of any
failure to pay such Tax, and will pay any federal, state, local, or foreign Tax
(and indemnify Buyer and VNG against any Adverse Consequences arising out of any
failure to pay such Tax) attributable to an election under state, local or
foreign law similar to the election available under Section 338(h) of the Code
(or which results from the making of an election under Section
39
338(h) of the Code) with respect to the purchase and sale of the VNG Stock
hereunder. In the event DRI shall not agree to join Buyer in making the Section
338(h)(10) Election on or before the Determination Date, Seller shall pay to
Buyer, as an adjustment to the Purchase Price, the sum of $50,000,000 plus
interest thereon from the Closing Date until the date such payment is made, at
an annual rate equal to the 30-day LIBOR Rate plus 250 basis points. Seller
shall pay the sum not later than 35 days after the Determination Date.
Section 5.5 Conduct of Business of VNG. From the date hereof until the
Closing, Seller will cause VNG to, and VNG covenants that it will, conduct its
business only in the ordinary course and in a manner consistent with past
practices, and use its best efforts to preserve its relationships with
licensors, suppliers, dealers, customers and others having business
relationships with VNG. From the date hereof until the Closing without written
consent of Buyer (such consent not to be unreasonably withheld or delayed),
Seller will not permit VNG to, and VNG will not:
(i) sell or dispose of any of its material assets or properties, other than
sales and dispositions in the ordinary course of business, sales or dispositions
of obsolete or surplus assets, sales and dispositions in connection with the
normal repair and/or replacement of assets or properties, or property losses
covered by insurance, or sales or dispositions in accordance with the express
terms of any Material Contract;
(ii) mortgage, pledge or otherwise encumber any of its assets;
(iii) amend in any material respect, terminate or assign any Contract
listed in Schedule 3.9;
40
(iv) incur any obligation or liability for borrowed money other than in the
ordinary course of business, indebtedness to Affiliates which will be repaid
prior to Closing, or indebtedness incurred in accordance with the express terms
of a Material Contract;
(v) make any individual capital expenditure of more than $100,000, or
aggregate capital expenditures of more than $1,000,000, other than in the
ordinary course of business, or to repair any damaged property or pursuant to
VNG's existing capital expenditure program;
(vi) merge or consolidate with, or acquire any or all of the capital stock
or assets of any other Person;
(vii) assume, guarantee, endorse or otherwise become responsible for the
obligations of any other Person, or make loans or advances to any other Person,
except in the ordinary course of business or pursuant to the Appliance Purchase
and Computer Purchase Program;
(viii) grant any individual or general increase in the compensation of any
VNG Employees other than normal merit or promotional increases in the normal
course of business or as required by an existing agreement; create any new
Employee Plan to be sponsored by VNG; extend, modify or change in any material
respect (except as may be required by applicable law) any Employee Plan
sponsored by VNG or terminate any existing Employee Plan sponsored by VNG;
(ix) enter into any Material Contract other than Material Contracts to be
fully performed by December 31, 2000, Material Contracts terminable on not
41
more than 90 days notice, or Material Contracts implementing another provision
of this Section 5.5;
(x) alter in any material way the manner in which it has regularly and
customarily maintained its books of account and records;
(xi) split, combine or otherwise change its capital stock, or redeem any of
its capital stock;
(xii) issue or sell any shares of its capital stock or any securities or
obligations convertible into or exchangeable for, or giving any Person any right
to acquire, any shares of its capital stock;
(xiii) declare or pay any dividend or distribution in respect of VNG Stock;
(xiv) amend its Articles of Incorporation or Bylaws;
(xv) hire any new employees for positions at or above the "manager" level
unless to replace an employee vacancy (including the replacement of Xxxxxx X.
Xxxxxxxx);
(xvi) waive or release any material right or claim, other than pursuant to
a settlement without ongoing obligations applicable to VNG or Buyer with respect
to (A) item 1 disclosed in Schedule 3.7 or (B) the item disclosed in Schedule
3.8; or
(xvii) enter into an agreement to do any of the things described in clauses
(i) through (xvi) above.
Section 5.6 Notice of Changes. Between the date of this Agreement and the
Closing, each party will promptly advise the other in writing with respect to
any matter arising after
42
execution of this Agreement of which that party obtains knowledge and which, if
existing or occurring at the date of this Agreement and not set forth in this
Agreement, including any of the Schedules, would have constituted a breach of a
representation or warranty of such party contained herein. Subject to the
condition set forth in Section 6.2, Seller, by written notice to Buyer, may
unilaterally amend the Schedules to this Agreement prior to the Closing Date
either (i) to add items resulting solely from events beyond the reasonable
control of Seller or VNG and occurring between the date of this Agreement and
the Closing Date (it being understood that any amendment pursuant to this clause
(i) shall be treated as if it did not appear in such Schedule for purposes of
Section 6.2 or Section 9.1(iv)), or (ii) to reflect Buyer's hiring decisions
pursuant to Section 5.8.1.
Section 5.7 Director and Officer Indemnification and Insurance.
5.7.1 Buyer shall cause VNG to keep in effect provisions in its articles of
incorporation and bylaws with respect to indemnification and director and
officer exculpation from liability identical to such provisions contained in the
articles of incorporation and bylaws of VNG on the date hereof, which provisions
shall not be amended, repealed, or otherwise modified for a period of six years
from the Closing Date in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the Closing Date were
directors or officers of VNG in respect of actions or omissions at or prior to
the Closing Date (excluding the transactions contemplated by this Agreement),
except as required by applicable law or except to make changes permitted by law
that would not materially diminish such directors' and officers' right of
indemnification.
43
5.7.2 For a period of six years after the Closing Date, provided VNG is
able to obtain coverage under existing policies pursuant to Section 5.11.3 and
such insurance is available at commercially reasonable rates, Buyer shall cause
to be maintained in effect the officers' and directors' liability insurance
maintained by VNG immediately prior to the Closing (provided that Buyer may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions that are not materially less advantageous than
such existing insurance) with respect to Claims arising from facts or events
that occurred prior to the Closing Date.
5.7.3 This Section 5.7 shall survive the Closing, is intended to benefit
the officers and directors of VNG as described in subsections 5.7.1 and 5.7.2,
and each of their respective heirs and personal representatives (each of which
shall be entitled to enforce this Section 5.7 against Buyer as a third-party
beneficiary of this Agreement), and shall be binding on all successors and
assigns of Buyer.
Section 5.8 Employee Matters.
5.8.1 Certain Employees.
(a) Related Company Employees. Schedule 5.8.1 lists those employees
(including employees who are absent from work on account of vacation,
disability, layoff, leave of absence or for any other reason on the Closing) of
one or more Affiliates of VNG (including Seller) whom Seller deems to be
principally associated with the assets or operations of VNG. At least 30 days
prior to Closing, Buyer shall notify Seller of those employees listed on
Schedule 5.8.1 to whom Buyer elects to offer employment with VNG. If Buyer fails
to so notify Seller, Buyer shall be deemed to have elected not to offer
employment to any employee listed on
44
Schedule 5.8.1. Neither VNG nor Buyer shall be liable for the benefits or
payments described in Section 3.13.7 with respect to such individuals listed in
Schedule 5.8.1. Those employees to whom Buyer notifies Seller that it elects to
offer employment are referred to as the "Related Company Employees." Buyer
agrees to offer employment, effective as of Closing, to the Related Company
Employees at salaries that are initially equal to those salaries in effect for
such Related Company Employees immediately prior to the Closing. Neither Buyer
nor VNG shall have any liability for employee benefits or severance, change in
control, retention or other payments due to any individual listed on Schedule
5.8.1 who does not become a Related Company Employee.
(b) Union Employees. VNG shall recognize the Local 50 of the International
Brotherhood of Electrical Workers as the bargaining representative for VNG
Employees currently represented, acknowledging the continuation of the
applicable Collective Bargaining Agreement through its term and the continuation
of the employment of all union employees as of the Closing Date.
5.8.2 Employee Benefits. Buyer agrees to provide non-union VNG Employees
from the Closing Date until the later of December 31, 2001 or one year from the
date of Closing, benefits that are substantially comparable in the aggregate to
the benefits available to non-union VNG Employees. For purposes of this Section
5.8.2, "benefits" shall mean any broad-based Employee Plans as of May 8, 2000
(excluding non-qualified or deferred compensation plans as well as the employee
stock ownership plan) that are governed by ERISA other than any benefits
conferred by or promised under an agreement with an individual. Notwithstanding
the foregoing, Buyer agrees to provide non-union VNG Employees who have retired
prior to the
45
Closing Date, benefits that are equivalent to those benefits that would have
been available to those employees had they remained covered under the System
Retiree Medical Insurance Plan of Consolidated Natural Gas and its Participating
Subsidiaries for Employees Who Are Not Represented by a Recognized Union (the
"CNG Retiree Medical Plan") (or under a successor plan) for a period of 5 years
from the Closing Date; provided, to the extent the benefits under the CNG
Retiree Medical Plan or its successor plan are reduced, Buyer's plan may
similarly be reduced, but Buyer is not required to increase benefits above the
level available under the CNG Retiree Medical Plan as in effect on May 8, 2000.
Following the Closing, Buyer shall, and shall cause VNG to (i) waive all
pre-existing conditions, exclusions, actively-at-work provisions, waiting
periods and any other similar conditions or requirements with respect to
participation and coverage of non-union VNG Employees and their covered
dependents under any group health plan in which VNG Employees may be eligible to
participate after the Closing Date; (ii) provide each non-union VNG Employee
with credit for payments made by such non-union VNG Employee or his covered
dependents prior to the Closing Date for purposes of satisfying any applicable
deductible, coinsurance or out-of-pocket requirements under any health insurance
plan in which non-union VNG Employees or covered dependents may be eligible to
participate after the Closing Date; and (iii) provide credit to non-union VNG
Employees for purposes of determining eligibility to participate, vesting and
benefit accrual under any employee benefit plan, program or arrangement in which
non-union VNG Employees may be eligible to participate after the Closing Date,
for service prior to the Closing Date with VNG, its Affiliates and predecessors
(but only to the extent recognized by VNG and its Affiliates for such purposes
immediately preceding the Closing); provided, that the foregoing shall not apply
to the extent it
46
would result in duplication of benefits. As of the Closing Date, VNG shall cease
to be a participating employer in any and all Employee Plans, except the
Employee Plans that are solely sponsored by VNG prior to the Closing Date.
5.8.3 Section 401(k) Plan.
(i) As soon as practicable following the Closing, Buyer shall establish a
defined contribution plan and trust (or amend an existing defined contribution
plan) for non-union VNG Employees, which shall be qualified under Sections 401
and 501 of the Internal Revenue Code and which shall provide for salary
reduction contributions pursuant to Section 401(k) of the Code ("Buyer's 401(k)
Plan").
(ii) Buyer's 401(k) Plan shall provide that each non-union VNG Employee be
given credit for the VNG Employee's service with VNG, its Affiliates and its
predecessor companies for purposes of determining the non-union VNG Employee's
eligibility to participate, eligibility for benefits and vesting under Buyer's
401(k) Plan. Buyer shall ensure that all "section 411(d)(6) protected benefits"
(as defined in Treasury Regulation 1.411(d) (4)) provided by the System Thrift
Plan of Consolidated Natural Gas Company and Its Participating Subsidiaries for
Employees Who Are Not Represented By A Recognized Union (the "Seller's 401(k)
Plan") are preserved in Buyer's 401(k) Plan. VNG Employees will not accrue
additional benefits after the Closing under defined contribution plans
maintained by Seller or any of its Affiliates.
(iii) VNG shall cease to participate in Seller's 401(k) Plan as of the
Closing Date. Assets of Seller's 401(k) Plan equal to the account balances of
non-union VNG Employees under Seller's 401(k) Plan (whether or not vested) will
be transferred to Buyer's
47
401(k) Plan as soon as practicable after the Closing. Any outstanding plan loans
to non-union VNG Employees shall be transferred with the underlying accounts.
Assets shall be transferred in cash unless otherwise determined by the Buyer.
(iv) The account balances of non-union VNG Employees in Seller's 401(k)
Plan will be valued as of the date on which the transfer is made. The account
balances of VNG Employees in Seller's 401(k) Plan shall share in the earnings,
appreciation and depreciation of Seller's 401(k) Plan for the period between the
Closing and the date on which the transfer is made. Any benefits that are
payable to non-union VNG Employees from Seller's 401(k) Plan after the Closing
and before the assets are transferred shall be paid from Seller's 401(k) Plan in
the ordinary course. The amount to be transferred to Buyer's 401(k) Plan shall
be reduced by the amount of such payments. The account balances to be credited
for non-union VNG Employees under Buyer's 401(k) Plan shall not be less than the
account balances of non-union VNG Employees under Seller's 401(k) Plan as of the
date on which the transfer is made.
(v) Effective on the date of the transfer of Seller's 401(k) Plan assets,
(i) Buyer and Buyer's 401(k) Plan shall assume all liabilities in connection
with the account balances of non-union VNG Employees under Seller's 401(k) Plan,
and (ii) Seller, its Affiliates and Seller's 40-1(k) Plan shall have no further
liability with respect to the account balances of non-union VNG Employees.
Seller and its Affiliates shall have no liability with respect to Buyer's 401(k)
Plan.
(vi) Buyer shall request that the Internal Revenue Service issue a
favorable determination letter with respect to the qualification under Sections
401 and 501 of the Internal Revenue Code of Buyer's 401(k) Plan and its related
trust. Buyer shall make such
48
changes to Buyer's 401(k) Plan as may be required by the Internal Revenue
Service in order for the Internal Revenue Service to issue a favorable
determination letter. Buyer shall provide Seller with a copy of the
determination letter received from the Internal Revenue Service with respect to
Buyer's 401(k) Plan as soon as the determination letter is received.
5.8.4 Employee Plans. The Employee Plans for which VNG shall have
responsibility following the Closing are set forth on Schedule 5.8.4.
5.8.5 Retirement Plan Transfer.
(i) As soon as practicable after the Closing, Buyer shall establish a
defined benefit pension plan and trust (or amend an existing defined benefit
plan) for the non-union VNG Employees, which shall be qualified under Sections
401 and 501 of the Internal Revenue Code ("Buyer's Retirement Plan").
(ii) Buyer's Retirement Plan shall provide that each non-union VNG Employee
be given credit for the VNG Employee's service with VNG, its Affiliates and its
predecessor companies, for purpose of determining the VNG Employee's eligibility
to participate, eligibility for benefits, vesting and accrual of benefits. VNG
Employees will not accrue additional benefits after the Closing under pension
plans maintained by Seller or any of its Affiliates.
(iii) VNG shall cease to participate in the System Pension Plan of
Consolidated Natural Gas Company and Its Participating Subsidiaries for
Employees Who Are Not Represented By A Recognized Union (the "Seller's
Retirement Plan") as of the Closing Date. Assets of the Seller's Retirement Plan
equal to the accrued benefit values (as described below) of the non-union VNG
Employees will be transferred to Buyer's Retirement
49
Plan as soon as practicable after the accrued benefit values have been
determined pursuant to this Section 5.8.5. Buyer shall ensure that all "section
411(d)(6) protected benefits" (as defined in Treasury Regulation 1.411(d)-4)
provided by the Seller's Retirement Plan are preserved with respect to
transferred benefits in Buyer's Retirement Plan. The term "accrued benefit
values" means the present value of the accrued benefits of VNG Employees as of
the Closing under the Seller's Retirement Plan, computed as if Seller's
Retirement Plan had terminated on the Closing Date and based on benefits accrued
before the Closing. Accrued benefit values shall be calculated as if all
affected participants ceased accruing any additional benefits under Seller's
Retirement Plan immediately prior to Closing, and for purposes of calculating
accrued benefit values, the 1983 Group Annuity Mortality Table and the then
applicable PBGC interest rates (including the immediate and deferred rates)
shall be used to value benefits upon plan termination, and otherwise actuarial
assumptions stated in the last plan actuarial valuation shall be used.
(iv) The calculations referred to in Section 5.8.5(iii) will be made by
Seller's actuary as soon as practicable following the Closing (but not later
than 120 days), subject to review by Buyer's actuary within 60 days following
receipt from Seller's actuary of a copy of its valuation together with all other
information reasonably necessary for Buyer's actuary to complete its review. In
the event of significant, reasonable comment from Buyer's actuary (other than a
comment relating to the assumptions described in 5.8.5(ii)) that cannot be
resolved between the Buyer's Actuary and Seller's Actuary within ten Business
Days, the question or questions in dispute shall then be promptly submitted to
any independent actuary of recognized standing to be selected by agreement of
Seller and Buyer and whose evaluations
50
shall be binding and final. The fees of any such independent actuary shall be
borne equally by Seller and Buyer. The assets shall be transferred in cash.
(v) Seller will adjust the amount to be transferred from the Seller's
Retirement Plan to Buyer's Retirement Plan, as calculated pursuant to Section
5.8.5(iii), by a pro rata share of the Seller Retirement Plan earnings,
appreciation and depreciation for the period between the Closing and the date on
which the assets are actually transferred.
(vi) Any benefits that are payable to non-union VNG Employees from the
Seller's Retirement Plan after the Closing and before the plan assets are
transferred shall be paid from the Seller's Retirement Plan in the ordinary
course to the extent permitted by law. The amount to be transferred to Buyer's
Retirement Plan shall be reduced by the payments made.
(vii) The accrued benefits to be credited under Buyer's Retirement Plan
with respect to the non-union VNG Employees shall not be less than the accrued
benefits of the non-union VNG Employees under the Seller's Retirement Plan as of
the Closing. Buyer shall ensure that Buyer's Retirement Plan provides non-union
VNG Employees with the benefits accrued prior to Closing under the Seller's
Retirement Plan in accordance with the terms of the Seller's Retirement Plan and
applicable law. Effective on the date of transfer of the Seller's Retirement
Plan assets, (i) Buyer and Buyer's Retirement Plan shall assume all liabilities
in connection with the accrued benefits of non-union VNG Employees under the
Seller's Retirement Plan, and (ii) Seller, its Affiliates and the Seller's
Retirement Plan shall have no
51
further liability with respect to the accrued benefits of non-union VNG
Employees. Seller and its Affiliates shall have no liability whatsoever with
respect to Buyer's Retirement Plan.
(viii) The parties agree that the transfers described in this Section 5.8.5
shall be made in accordance with Section 414(l) of the Internal Revenue Code.
Buyer and Seller shall make any appropriate filings required under the Internal
Revenue Code or ERISA in connection with the transfers described in this Section
5.8.5 as soon as practicable after the Closing. Seller shall be responsible for
delivery to VNG Employees of any notice required under Code Section 204(h) in
connection with the transactions contemplated by this Agreement.
(ix) Buyer will request that the Internal Revenue Service issue a favorable
determination letter with respect to the qualification under Sections 401 and
501 of the Internal Revenue Code of Buyer's Retirement Plan (and the related
trust). Buyer will file with the Internal Revenue Service application for a
determination letter for Buyer's Retirement Plan. Buyer will make such changes
to the plan as may be required by the Internal Revenue Service in order for the
Internal Revenue Service to issue a favorable determination letter. Buyer will
provide Seller with a copy of the determination letter received from the
Internal Revenue Service with respect to Buyer's Retirement Plan within a
reasonable time after the determination letter is received.
(x) Seller will request that the Internal Revenue Service issue a favorable
determination letter with respect to the qualification under Sections 401 and
501 of the Internal Revenue Code of the Seller's Retirement Plan (and the
related trust). If necessary, Seller will file with the Internal Revenue Service
an application for determination
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letter for the Seller's Retirement Plan. Seller will make such changes to the
plan as may be required by the Internal Revenue Service in order for the
Internal Revenue Service to issue a favorable determination letter. Seller will
provide Buyer with a copy of the favorable determination letter received from
the Internal Revenue Service with respect to the Seller's Retirement Plan within
a reasonable time after the determination letter is received.
5.8.6 VNG Retirement Plan Funding. The VNG Retirement Plan shall be fully
funded as of the Closing Date, so that any such plan will have assets at least
equal to the "accrued benefit values" of the VNG Employees under such plan. For
this purpose, the term "accrued benefit values" means the present value of the
accrued benefits of VNG Employees as of the Closing under the plan, computed as
if the plan had terminated on the Closing Date and based on benefits accrued
before the Closing. Accrued benefit values shall be calculated as if all
affected participants ceased accruing any additional benefits under the plan
immediately prior to Closing and for purposes of calculating accrued benefit
values, the 1983 Group Annuity Mortality Table and then applicable PBGC interest
rates (including the immediate and deferred rates) shall be used to value
annuities upon plan termination, and otherwise actuarial assumptions stated in
the last plan actuarial valuation shall be used. Seller shall fully fund such
plan prior to the Closing Date. All transfers of assets or additional funding of
plans shall be made in cash.
5.8.7 Transfer from CNG VEBA. VNG shall cease to participate in the
Consolidated Natural Gas Voluntary Employees Beneficiary Association (the
"Seller's VEBA") as of the Closing Date. As soon as practicable after Closing,
the assets and liabilities of or associated with the VNG Non-Union/Management
subaccount of the CNG VEBA shall be transferred to Buyer's VEBA. The assets
shall be transferred in cash.
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5.8.8 COBRA. Buyer shall be responsible for providing group health coverage
under the Consolidated Omnibus Budget Reconciliation Act ("COBRA") for each
non-union VNG Employee and each qualified beneficiary with respect to a
non-union VNG Employee who is entitled to COBRA coverage under an Employee Plan
of Seller as a result of a " qualifying event" (as defined under COBRA) that
occurs on or after the Closing Date. Pursuant to the Buyer's assumption of the
group health plan maintained by VNG for union employees, Buyer shall retain
liability for COBRA coverage for each union VNG employee and each qualified
beneficiary with respect to a union VNG Employee that experienced a "qualifying
event" prior to, on or after the Closing Date.
5.8.9 Flexible Spending Account Transfer. As of the Closing, Buyer shall
allow all non-union VNG Employees to participate in Buyer's plan (or establish
such plan) under Section 125 of the Internal Revenue Code ("Buyer's Section 125
Plan"). The non-union VNG Employees who elected to participate in Seller's
Section 125 Plan for the calendar year of Closing shall be eligible to
participate in Buyer's Section 125 Plan for that part of the calendar year of
Closing remaining after the Closing. Buyer shall maintain Buyer's Section 125
Plan as a continuation of Seller's Section 125 Plan for the calendar year of
Closing, so that the aggregate benefits that non-union VNG Employees receive
under Seller's Section 125 Plan and Buyer's Section 125 Plan for the calendar
year of Closing is not less than the benefits the non-union VNG Employees would
have received had they remained employed by Seller through the calendar year of
Closing.
(i) If the aggregate amount contributed by non-union VNG Employees for the
calendar year of Closing to non-union VNG Employees' spending accounts
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under Seller's Section 125 Plan exceeds the aggregate claims paid by Seller for
the calendar year of Closing with respect to the non-union VNG Employees'
spending accounts, Seller will pay Buyer an amount in cash equal to such excess,
to the extent that the aggregate amount contributed by non-union VNG Employees
for the calendar year of Closing to their spending accounts under Buyer's
Section 125 Plan is less than the aggregate claims paid by Buyer for the
calendar year of Closing with respect to the non-union VNG Employees' spending
accounts.
(ii) If the aggregate amount contributed by non-union VNG Employees for the
calendar year of Closing to the respective non-union VNG Employees' spending
accounts under Seller's Section 125 Plan is less than the aggregate claims paid
by Seller for the calendar year of closing with respect to the non-union VNG
Employees' spending accounts, Buyer will pay Seller an amount in cash equal to
such deficit, to the extent that the aggregate amount contributed by non-union
VNG Employees for the calendar year of Closing to the non-union VNG Employees'
spending accounts under Buyer's Section 125 Plan exceeds the aggregate claims
paid by Buyer for the calendar year of Closing with respect to the non-union VNG
Employees' spending accounts.
(iii) The foregoing payments shall be made as soon as practicable after all
claims have been paid for the calendar year of Closing.
5.8.10 Administration. Buyer and Seller shall each make their appropriate
employees available to the other at such reasonable times as may be necessary
for the proper administration by the other of any and all matters relating to
employee benefits affecting VNG Employees.
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5.8.11 Non-solicitation of Employees. Seller covenants that it will
refrain, and will use its best efforts to cause Affiliates of Seller to refrain,
from soliciting any of the existing employees of VNG or the employees listed on
Schedule 5.8.1 for employment with Seller or its Affiliates from the date of
this Agreement through the period ending twenty-four (24) months after the
Closing Date; provided, however, that Seller may solicit employees terminated by
VNG and Schedule 5.8.1 Associated Seller Employees who do not become Related
Company Employees.
Section 5.9 WARN Act. If a plant closing or a mass layoff occurs or is
deemed to occur with respect to VNG or any of its facilities at any time on or
after the Closing, Buyer shall be solely responsible for providing all notices
required under the Worker Adjustment and Retraining Notification Act, 29 U.S.C.
ss.2109 et seq. or the regulations promulgated thereunder (the "WARN Act") and
for taking all remedial measures, including, without limitation, the payment of
all amounts, penalties, liabilities, costs and expenses if such notices are not
provided.
Section 5.10 Satisfaction of Debt. At or immediately prior to Closing,
Seller shall take, or cause VNG to take, such actions as are necessary to (i)
satisfy or extinguish all intercompany debt obligations between VNG, as
borrower, and any of Seller or its Affiliates, as lender, (ii) terminate as to
VNG the Supplemental Agreement, and (iii) satisfy or extinguish all intercompany
payables and receivables between VNG and any of Seller or its Affiliates.
Section 5.11 Related Agreements.
5.11.1 The parties recognize that Seller provides a significant level of
support services to VNG in the areas of corporate services, information
technology and business support services that may need to continue following
Closing. If the parties deem necessary, at Closing
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the parties shall enter into a transition services agreement in substantially
the form attached as Exhibit 5.11.1 pursuant to which Seller or its Affiliates
shall provide for a period of up to one year on a fully-loaded cost basis
certain transition services, including, but not limited to:
(i) operation of VNG's Customer Service System ("CSS") on Seller's computer
hardware platforms;
(ii) access to Oracle enterprise financial software through Seller's
computer hardware and network communications facilities;
(iii) access to Strategic Asset Management System ("XXXX") software through
Seller's computer hardware and network communications facilities;
(iv) access to Peoplesoft and Automated Time and Attendance software
through Seller's computer hardware and network communications facilities;
(v) gas supply, gas control and measurement, purchasing and
telecommunications services;
(vi) natural gas pipeline aerial surveillance services;
(vii) operation of VNG's Customer Payment Processing system; and (viii)
operation of VNG's remittance processing.
5.11.2 At Closing the parties shall enter into a software license agreement
in substantially the form of Exhibit 5.11.2 for the use by VNG of the
proprietary software of Seller described on Schedule 3.19.
5.11.3 DRI and Seller shall use reasonable efforts to assist Buyer and VNG,
at Buyer's request, to obtain for VNG, separately, and in its own name, the
rights and coverage
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under the insurance policies maintained by Seller or DRI for the benefit of VNG,
including the right to purchase "tail" coverage under those policies. In
addition, in the event that such rights and coverage cannot be separately
obtained by VNG, Seller and DRI shall, if requested by Buyer and if such
coverages can be obtained by Seller or DRI on behalf of VNG, maintain such
policies on behalf of VNG or purchase on behalf of VNG "tail" coverage under
those policies. VNG shall reimburse Seller or DRI, as the case may be, for any
premiums and other costs paid to obtain such coverage.
ARTICLE 6
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
The obligations of Buyer under this Agreement shall be subject to the
satisfaction (or waiver in writing by Buyer), at or before the Closing, of each
of the following conditions, and Seller shall use reasonable efforts to cause
each of such conditions to be satisfied as promptly as practicable.
Section 6.1 No Injunction. No Federal or state governmental agency or
authority or political subdivision thereof or Federal or state court of
competent jurisdiction shall have issued any injunction or other order (whether
temporary, preliminary or permanent) which prohibits or restrains (or seeks to
prohibit or restrain) the consummation of the transactions contemplated hereby,
nor shall any other suit, action or other proceeding be pending before any court
in which the consummation of the transactions contemplated hereby are sought to
be restrained or enjoined; provided, that the parties shall use their reasonable
efforts to litigate against, and obtain the lifting of, any such injunction,
order or proceeding.
Section 6.2 Representations and Warranties. The representations and
warranties of Seller and DRI contained in Article 3 shall be true and correct in
all material respects (except
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where such representation or warranty is by its terms qualified by materiality
or Material Adverse Effect, in which case such representation or warranty must
be true and correct in all respects) as of the date hereof and as of the Closing
Date (except where such representation or warranty is expressly made only as of
another specific date, in which case such representation or warranty must be
true and correct only as of such specific date) as though such representations
and warranties were made at and as of the Closing Date, and Buyer shall have
received at the Closing a certificate, dated the Closing Date, signed on behalf
of Seller and DRI by executive officers of Seller and DRI to such effect.
Section 6.3 Performance. Seller and VNG shall have performed and complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing; and
Buyer shall have received at the Closing a certificate of Seller and VNG dated
the Closing Date and signed on behalf of Seller and VNG by executive officers of
Seller and VNG to such effect.
Section 6.4 Approvals and Filings. All consents, authorizations and
approvals from, and all declarations, filings and registrations with,
governmental agencies or third parties that are listed on Schedule 6.4 shall
have been obtained or made, free of any term, condition, restriction, imposed
liability or other provision that would, or would reasonably be expected to,
have a Material Adverse Effect or a material adverse effect on Buyer or its
Affiliates, and shall be final and unappealable, except where the failure to
obtain or make the same is a result of Buyer's breach of its obligations
hereunder. All waiting periods under the HSR Act shall have expired or been
properly terminated.
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Section 6.5 No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred a material adverse change in the business, assets,
condition (financial or otherwise), or results of operations of VNG, taken as a
whole, excluding, in any case, (i) any changes, circumstances or effects
resulting from or relating to changes or developments in the economy, financial
markets, commodity markets, laws, regulations or rules in the applicable gas
markets (including, without limitation, changes in laws or regulations affecting
owners or providers of gas production, transmission or distribution as a group,
and not VNG or its Affiliates exclusively) or in the political climate generally
or in any specific region and (ii) any changes in conditions or developments
generally applicable to the industries in which VNG is involved.
ARTICLE 7
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall be subject to the
satisfaction (or waiver in writing by Seller) on or before the Closing of each
of the following conditions, and Buyer shall use reasonable efforts to cause
each of such conditions to be satisfied as promptly as practicable:
Section 7.1 No Injunction. No Federal or state governmental agency or
authority or political subdivision thereof or Federal or state court of
competent jurisdiction shall have issued any injunction or other order (whether
temporary, preliminary or permanent) which prohibits or restrains (or seeks to
prohibit or restrain) the consummation of the transactions contemplated hereby,
nor shall any other suit, action or other proceeding be pending before any court
in which the consummation of the transactions contemplated hereby are sought to
be restrained or enjoined; provided, that the parties shall use their reasonable
efforts to litigate against, and obtain
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the lifting of, any such injunction, order or proceeding.
Section 7.2 Representations and Warranties. The representations and
warranties of Buyer contained in Article 4 shall be true and correct in all
material respects (except where such representation or warranty is by its terms
qualified by materiality or Material Adverse Effect, in which case such
representation or warranty must be true and correct in all respects) as of the
date hereof and as of the Closing Date (except where such representation or
warranty is expressly made only as of another specific date, in which case such
representation or warranty must be true and correct only as of such specific
date) as though such representations and warranties were made at and as of the
Closing Date, and Seller shall have received at the Closing a certificate, dated
the Closing Date, signed on behalf of Buyer by an executive officer of Buyer to
such effect.
Section 7.3 Performance. Buyer shall have performed and complied with, in
all material respects, all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to the Closing; and Seller
shall have received at the Closing a certificate, dated the Closing Date, signed
on behalf of Buyer by an executive officer of Buyer to such effect.
Section 7.4 Approvals and Filings. All consents, authorizations and
approvals from, and all declarations, filings and registrations with,
governmental agencies or third parties that are listed on Schedule 6.4 shall
have been obtained or made, free of any term, condition, restriction, imposed
liability or other provision that would, or would reasonably be expected to,
have a material adverse effect on Seller, and shall be final and unappealable,
except where the failure to
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obtain or make the same is a result of Seller's breach of its obligations
hereunder. All waiting periods under the HSR Act shall have expired or been
properly terminated.
ARTICLE 8
CLOSING
Section 8.1 Time and Place. Subject to Article 9, the closing of the sale
by Seller and the purchase by Buyer of the VNG Stock (the "Closing") shall take
place at the offices of McGuire, Woods, Battle & Xxxxxx LLP, One Xxxxx Center,
000 Xxxx Xxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000 on the fifteenth Business Day
after the date on which all of the conditions contained in Articles 6 and 7 are
satisfied or waived (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions); provided that, notwithstanding the foregoing, the Closing may take
place at such other place, at such other time, or on such other date as the
parties hereto may mutually agree (the date on which the Closing occurs being
herein referred to as the "Closing Date").
Section 8.2 Deliveries. At the Closing:
8.2.1 Stock Certificates. Seller shall deliver to Buyer certificate(s)
evidencing all of the shares of VNG Stock owned by Seller, duly endorsed in
blank for transfer or accompanied by stock power duly executed in blank.
8.2.2 Certificates. Buyer and Seller shall deliver to each other the
certificates and other items described in Articles 5, 6 and 7.
8.2.3 Resignations. Seller shall deliver, or cause to be delivered, to
Buyer the resignations of all officers and directors of VNG.
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8.2.4 Opinion of Seller's and DRI's Counsel. Buyer shall receive from
counsel to Seller and DRI an opinion, dated the Closing Date, in form and
substance reasonably satisfactory to Buyer and its counsel.
8.2.5 Opinion of Buyer's Counsel. Seller shall receive from counsel to
Buyer an opinion, dated the Closing Date, in form and substance reasonably
satisfactory to Seller and its counsel.
8.2.6 Additional Documents. Each party shall execute and deliver to the
other parties all documents which the other reasonably determines are necessary
to consummate the transactions contemplated hereby or to demonstrate or evidence
compliance with the terms or the accuracy of any representation and warranty set
forth herein.
ARTICLE 9
TERMINATION AND ABANDONMENT
Section 9.1 Methods of Termination. This Agreement may be terminated and
the transactions herein contemplated may be abandoned at any time prior to the
Closing Date:
(i) by mutual consent of Seller and Buyer; or
(ii) by Buyer at any time after December 31, 2000 if any of the conditions
provided for in Article 6 of this Agreement shall remain unsatisfied and not
have been waived in writing by Buyer prior to such date; provided, that if any
condition in Article 6 has not been so satisfied or waived and diligent efforts
are being undertaken to satisfy such condition, including, but not limited to,
efforts to cure any breach of any representation or warranty, and the Virginia
State Corporation Commission extends the time limit for the sale of VNG by
Seller, then the references to December 31, 2000 in this Section 9.1(ii) shall
be extended for up to the
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shorter of (A) 90 days or (B) the period of the Virginia State Corporation
Commission extension, so long as such diligent efforts continue; or
(iii) by Seller at any time after December 31, 2000 if any of the
conditions provided for in Article 7 of this Agreement shall remain unsatisfied
or not have been waived in writing by Seller prior to such date; provided, that
if any condition in Article 7 has not been so satisfied or waived and diligent
efforts are being undertaken to satisfy such condition, including, but not
limited to, efforts to cure any breach of any representation or warranty, and
the Virginia State Corporation Commission extends the time limit for the sale of
VNG by Seller, then the references to December 31, 2000 in this Section 9.1(iii)
shall be extended for up to the shorter of (A) 90 days or (B) the period of the
Virginia State Corporation Commission extension, so long as such diligent
efforts continue;
(iv) by Buyer, upon not less than 30 days prior written notice, if there
has been a violation or breach by Seller of its agreements, representations or
warranties contained in this Agreement, or if Seller notifies Buyer of a matter
pursuant to Section 5.6, and such violation, breach or disclosed matter would,
individually or in conjunction with past violations, breaches or disclosed
matters, have a Material Adverse Effect which is not susceptible to cure (or if
so susceptible is not the subject of diligent efforts on the part of the
breaching party to cure within the cure periods provided in Section 9.1(ii)).
Any written notice provided by Buyer pursuant to this subsection shall reference
this subsection and specify in reasonable detail the claimed violation and
breach which Buyer claims as a basis for the exercise of its rights under this
subsection; or
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(v) by Seller upon not less than 30 days prior written notice, if there has
been a material violation or breach by Buyer of its agreements, representations
or warranties contained in this Agreement, or if Buyer notifies Seller of a
matter pursuant to Section 5.6, and such violation, breach or disclosed matter
would materially and adversely impair the ability of Buyer to consummate the
transactions contemplated by this Agreement and such violation, breach or
disclosed matter is not susceptible to cure (or if so susceptible, is not the
subject of diligent efforts on the part of the breaching party to cure within
the cure periods provided in Section 9.1(iii)). Any written notice provided by
Seller pursuant to this subsection shall reference this subsection and specify
in reasonable detail the claimed violation and breach which Seller claims as a
basis for the exercise of its rights under this subsection.
Section 9.2 Procedure Upon Termination and Consequences. Buyer or Seller
may terminate this Agreement when permitted pursuant to Section 9.1 by
delivering written notice of such termination, and such termination shall be
effective upon delivery of such notice in accordance with Section 11.3. If this
Agreement is terminated as provided herein, (i) each party will redeliver all
documents, work papers and other material of any other party relating to the
transactions contemplated hereby, whether obtained before or after the execution
hereof, to the parties furnishing the same; and (ii) no party hereto shall have
any liability or further obligation to any other party to this Agreement except
with respect to the Confidentiality Agreement, which shall survive the
termination of this Agreement, including with respect to information that is
subject to the Confidentiality Agreement pursuant to Section 5.1, and except for
such legal and equitable rights and remedies which any party may have by reason
of any breach or violation of this Agreement by any other party prior to such
termination.
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ARTICLE 10
INDEMNIFICATION
Section 10.1 Remedies.
10.1.1 Indemnification by Seller and DRI. Except as otherwise limited by
this Article 10, Seller and DRI (collectively for purposes of this Article 10,
the "Seller Indemnifying Parties") shall, jointly and severally, indemnify and
reimburse Buyer and VNG for any and all claims, losses, liabilities, damages,
costs (including court costs and investigative and remedial costs) and expenses
(including reasonable attorneys' and accountants' fees) (hereinafter "Loss" or
"Losses") incurred by Buyer, VNG, or any successors or assigns thereto, and
their respective officers, directors, employees, consultants and agents (the
"Buyer Protected Parties"), as a result of, or with respect to, (i) (A) any
breach or inaccuracy of any representation or warranty of Seller or DRI set
forth in this Agreement or in any certificate or other document delivered
pursuant hereto or in connection herewith (which representations and warranties
in the case of the certificate delivered pursuant to Section 6.2 hereof, shall
be without regard to the materiality qualification contained in such
certificate), whether such breach or inaccuracy exists or is made on the date of
this Agreement or as of the Closing Date or (B) any matter described in items
(1) and (2) of Schedule 3.18.1; (ii) any breach of or noncompliance by Seller,
DRI or VNG with any covenant or agreement of Seller, DRI or VNG contained in
this Agreement, and (iii) any Environmental Condition (including, without
limitation, any Loss arising out of any contribution or indemnity obligation
under the Supplemental Agreement among DRI, VNG and Seller dated January 23,
1990 (the "Supplemental Agreement"), a true, correct and complete copy of which
has been provided to Buyer). For the purpose of this Article 10, consequential
damages or any
66
damages to the extent attributable to a failure by the indemnified party to use
reasonable efforts to mitigate damages shall not constitute Losses and shall not
otherwise be recoverable.
10.1.2 Indemnification by Buyer. Except as otherwise limited by this
Article 10, Buyer shall indemnify and reimburse Seller for any and all Losses
incurred by Seller or any successors or assigns thereto, and their respective
officers, directors, employees, consultants and agents (the "Seller Protected
Parties"), as a result of, or with respect to, (i) any breach or inaccuracy of
any representation or warranty of Buyer set forth in this Agreement or in any
certificate or other document delivered pursuant hereto or in connection
herewith (which representations and warranties in the case of the certificate
delivered pursuant to Section 7.2 hereof, shall be without regard to the
materiality qualification contained in such certificate), whether such breach or
inaccuracy exists or is made on the date of this Agreement or as of the Closing
Date and (ii) any breach of or noncompliance by Buyer with any covenant or
agreement of Buyer contained in this Agreement.
Section 10.2 Indemnity Claims.
10.2.1 Survival. The representations and warranties of the parties
contained herein or in any certificate or other document delivered pursuant
hereto or in connection herewith shall not be extinguished by the Closing but
shall survive the Closing, subject to the limitations set forth in Section
10.2.2 hereof with respect to the time periods within which claims for indemnity
must be asserted, and the covenants and agreements of the parties contained
herein shall survive without limitation as to time except as provided by
applicable statutes of limitation or as may be otherwise specified herein. No
investigation or other examination of VNG by Buyer, its designee or
representatives, or of Buyer by Seller, its designee or representatives, shall
67
affect the term of survival of any representation or warranty contained herein
or in any certificate or other document delivered pursuant hereto or in
connection herewith, or the term of the right of the Buyer Protected Parties or
the Seller Protected Parties (collectively, the "Protected Parties") to seek
indemnification hereunder.
10.2.2 Time to Assert Claims. All claims for indemnification hereunder
shall be asserted no later than twelve (12) months after the Closing Date,
except as follows
(i) claims with respect to (A) Losses arising out of or related in any way
to any breach of or inaccuracy in the representations and warranties contained
in Sections 3.1, 3.2, 3.5, 3.7.2, 4.1 and 4.2, and (B) Losses arising out of or
related in any way to the matters described in Sections 10.1.1(i)(B), (ii) and
(iii) and 10.1.2(ii) may be made without limitation, except as limited by law;
and
(ii) claims with respect to Losses arising out of or related in any way to
any breach of or inaccuracy in the representations and warranties contained in
Section 3.8 and in Section 3.13 as it relates to ERISA compliance hereof, may be
made until, and shall be made no later than, thirty (30) days after the
expiration of the applicable statute of limitations relative to the liability
relating to such representation or warranty; and
(iii) claims with respect to Losses arising out of or related in any way to
any breach of or inaccuracy in the representations contained in Section 3.18
hereof, may be made until, and shall be made no later than twenty-four(24)
months after the Closing Date;
(the matters cited in clauses (i), (ii) and (iii) above being hereinafter
collectively referred to as the "Surviving Matters").
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Section 10.3 Notice of Claim. The Protected Party shall notify the Seller
Indemnifying Parties or Buyer, as the case may be (the "Indemnifying Party"), in
writing, of any claim for indemnification, specifying in reasonable detail the
nature of the Loss, and, if known, the amount, or an estimate of the amount, of
the liability arising therefrom. The Protected Party shall provide to the
Indemnifying Party as promptly as practicable thereafter such information and
documentation as may be reasonably requested by the Indemnifying Party to
support and verify the claim asserted, so long as such disclosure would not
violate the attorney-client privilege of the Protected Party.
Section 10.4 Defense. If the facts pertaining to a Loss arise out of the
claim of any third party, or if there is any claim against a third party (other
than a Protected Party) available by virtue of the circumstances of the Loss,
the Indemnifying Party may assume the defense or the prosecution thereof by
prompt written notice to the affected Protected Party, including the employment
of counsel or accountants, at its cost and expense. Such notice shall expressly
acknowledge the affected Protected Party's right to indemnification under
Article 10 of this Agreement. The affected Protected Party shall have the right
to employ counsel separate from counsel employed by the Indemnifying Party in
any such action and to participate therein, but the fees and expenses of such
counsel employed by the affected Protected Party shall be at such Protected
Party's expense. In the event the Indemnifying Party has elected to assume the
defense or prosecution of a claim as provided herein, the Indemnifying Party
shall not be liable for any settlement of any such claim effected without its
prior written consent, which shall not be unreasonably withheld; provided that
if the Indemnifying Party does not assume the defense or prosecution of a claim
as provided above within thirty (30) days after notice thereof from any
69
Protected Party as provided above, the affected Protected Party may settle such
claim without the consent of the Indemnifying Party. The Indemnifying Party
shall not agree to a settlement of any claim which provides for any relief other
than the payment of monetary damages or which could have a material precedential
impact or effect on the business or financial condition of any Protected Party
without the affected Protected Party's prior written consent. Whether or not the
Indemnifying Party chooses to so defend or prosecute such claim, all the parties
hereto shall cooperate in the defense or prosecution thereof and shall furnish
such records, information and testimony, and attend such conferences, discovery
proceedings, hearings, trials and appeals, as may be reasonably requested in
connection therewith.
Section 10.5 Limitations. Buyer shall not be liable pursuant to Section
10.1.2(i) and neither DRI nor Seller shall be liable pursuant to Section
10.1.1(i)(A), until the Losses incurred thereunder shall exceed $1,000,000, in
which event the indemnifying party shall only be liable for the Losses in excess
of $1,000,000. The Seller Indemnifying Parties' aggregate indemnification
obligations under this Article 10 shall not exceed twenty percent (20%) of the
Purchase Price. Buyer's aggregate indemnification obligations under this Article
10 shall not exceed twenty percent (20%) of the Purchase Price; provided,
however, the "cap" on liability shall not apply to indemnification obligations
(i) under Section 10.1.1(i)(B), (ii) under Section 10.1.1(i)(A) or Section
10.1.2(i) relating to the representations in Sections 3.1, 3.2, 3.5, 4.1, and
4.2, (iii) under Section 10.1.1(ii) with respect to covenants and agreements of
Seller, DRI or VNG set forth in Sections 5.4, 5.8, 5.10 and Article 2, (iv)
under Section 10.1.2(ii) with respect to covenants and agreements of Buyer set
forth in Sections 5.4, 5.8 and Article 2, and (v) under Section 10.1.1(iii).
70
ARTICLE 11
MISCELLANEOUS
Section 11.1 Amendment and Modification. This Agreement may be amended,
modified and supplemented only by written agreement of Buyer and Seller.
Section 11.2 Waiver of Compliance. Any failure of Buyer, Seller or DRI to
comply with an obligation, covenant, agreement or condition contained herein may
be expressly waived in writing by Seller, in the event of any such failure by
Buyer, or by Buyer, in the event of any such failure by Seller or DRI, but such
waiver or failure to insist upon strict compliance shall not operate as a waiver
of, or estoppel with respect to, any subsequent or other failure.
Section 11.3 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and may be given by any of the following methods: (a) personal
delivery, (b) facsimile transmission, (c) registered or certified mail, postage
prepaid, return receipt requested, or (d) next day air courier service. Notices
shall be sent to the appropriate party at its address or facsimile number given
below (or at such other address or facsimile number for such party as shall be
specified by notice given hereunder).
If to Seller, to:
Consolidated Natural Gas Company
c/o Dominion Resources, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Vice President and General Counsel
Fax No.: (000) 000-0000
If to DRI, to:
Dominion Resources, Inc.
000 Xxxxxxxx Xxxxxx
00
Xxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx, Vice President and General Counsel
Fax No.: (000) 000-0000
with copies to:
Virginia Natural Gas, Inc.
0000 Xxxx Xxxxxxxx Xxxxx Xxxx.
Xxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxxxxxxx, Chief Counsel
Fax No.: (000) 000-0000
or to such other Person or address as Seller shall designate in writing.
If to Buyer to:
AGL Resources Inc.
000 Xxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Attn: Xxxx X. Xxxxxxx, Senior Vice President and Counsel
Fax No.: (000) 000-0000
with a copy to:
Long Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxx
Fax No. (000) 000-0000
or to such other Person or address as Buyer shall designate in writing.
All such notices, requests, demands, waivers and communications shall be
deemed effective upon (i) actual receipt thereof by the addressee, (ii) actual
delivery thereof to the appropriate address or (iii) in the case of a facsimile
transmission, transmission thereof by the sender and issuance by the
transmitting machine of a confirmation slip that the number of pages
constituting the notice have been transmitted without error. In the case of
notices sent by facsimile transmission, the sender shall contemporaneously mail
a copy of the notice to the
72
addressee at the address provided for above by first class mail or by an air
courier service, postage prepaid. However, such mailing shall in no way alter
the time at which the facsimile notice is deemed received.
Section 11.4 Binding Nature; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without prior written consent of the other party. Notwithstanding
the foregoing, all rights, obligations, and duties of Buyer may be assigned by
Buyer to any Affiliate of Buyer, provided that Buyer remains liable for its
obligations hereunder. Except as set forth in Section 5.7, nothing contained
herein, express or implied, is intended to confer on any Person other than the
parties hereto or their successors and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
Section 11.5 Entire Agreement. This Agreement, including the Schedules,
Exhibits and the Confidentiality Agreement, embodies the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein. This Agreement and the Confidentiality Agreement supersede all prior
agreements and understandings among the parties with respect to such subject
matter and supersede any letters, memoranda or other documents or
communications, whether oral, written or electronic, submitted or made by (i)
Buyer or its agents or representatives to Seller, VNG, DRI, Xxxxxxx Xxxxx & Co.
or any of their respective agents or representatives, or (ii) Seller, VNG, DRI,
Xxxxxxx Xxxxx & Co. or their respective agents or representatives to Buyer or
any of its agents or representatives, in connection with the bidding process
which occurred prior to the execution of this Agreement or otherwise in
connection with
73
the negotiation and execution of this Agreement. No communications by or on
behalf of Seller, including responses to any questions or inquiries, whether
orally, in writing or electronically, and no information provided in any data
room or any copies of any information from any data room provided to Buyer or
any other information shall be deemed to constitute a representation, warranty
or an agreement of Seller or be part of this Agreement.
Section 11.6 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement will pay its own expenses in connection with the
negotiation of this Agreement, the performance of its obligations hereunder, and
the consummation of the transactions contemplated herein.
Section 11.7 Press Releases and Announcements; Disclosure. No press release
or other public announcement or disclosure related to this Agreement or the
transactions contemplated herein (including but not limited to the terms and
conditions of this Agreement) shall be issued or made without the prior approval
of Buyer and Seller. The foregoing shall not prohibit any disclosure required by
law, provided such disclosure is made pursuant to the Confidentiality Agreement
and, to the extent legally permissible, the disclosing party consults with the
other parties in advance of such disclosure.
Section 11.8 Acknowledgment.
11.8.1 Except as otherwise expressly provided herein, in the Schedules and
in the certificate to be delivered pursuant to Section 6.2, Buyer acknowledges
that neither Seller, VNG nor any other Person has made any representation or
warranty, expressed or implied, as to the accuracy or completeness of any
information regarding Seller or VNG not included in this Agreement, the
Schedules and the certificate to be delivered pursuant to Section 6.2. Without
74
limiting the generality of the foregoing, no representation or warranty is made
with respect to any information in the Information Memorandum dated February
2000 or any supplement or amendment thereto provided in connection with the
solicitation of proposals to enter into the transactions contemplated by this
Agreement, such information having been provided for the convenience of Buyer in
order to assist Buyer in framing its due diligence efforts.
11.8.2 Buyer further acknowledges that Buyer, either alone or together with
any Persons Buyer has retained to advise it with respect to the transactions
contemplated hereby ("Advisors"), has knowledge and experience in transactions
of this type and in the business of VNG, and is therefore capable of evaluating
the risks and merits of acquiring the VNG Stock.
Section 11.9 Disclaimer Regarding Assets. Except as otherwise expressly
provided herein, in the Schedules and in the certificate to be delivered
pursuant to Section 6.2, Seller expressly disclaims any representations or
warranties of any kind or nature, express or implied, as to the condition, value
or quality of the assets or operations of VNG or the prospects (financial and
otherwise), risks and other incidents of VNG and Seller specifically disclaims
any representation or warranty of merchantability, usage, suitability or fitness
for any particular purpose with respect to such assets, or any part thereof, or
as to the workmanship thereof, or the absence of any defects therein, whether
latent or patent.
Section 11.10 Governing Law. This Agreement shall be construed and enforced
in accordance with the laws of the Commonwealth of Virginia without giving
effect to the choice of law principles thereof. Each party consents to personal
jurisdiction in any action brought in any court, federal or state, within the
Commonwealth of Virginia having subject matter jurisdiction arising under this
Agreement, and each of the parties hereto agrees that any action
75
instituted by either of them against the other with respect to this Agreement
will be instituted exclusively in a court, federal or state, within the
Commonwealth of Virginia.
Section 11.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart of this
Agreement.
Section 11.12 Interpretation. The article and section headings contained in
this Agreement are inserted for convenience only and shall not constitute a part
hereof.
[SIGNATURES APPEAR ON NEXT PAGE]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
CONSOLIDATED NATURAL GAS COMPANY
By: /s/ Xxxxxx X. Xxxxxxxx
_______________________________
Xxxxxx X. Xxxxxxxx
Executive Vice President and
Chief Financial Officer
DOMINION RESOURCES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
_______________________________
Xxxxxx X. Xxxxxxxx
Executive Vice President and
Chief Financial Officer
VIRGINIA NATURAL GAS, INC.
By: /s/ Xxxxxxx X. Xxx
_______________________________
Xxxxxxx X. Xxx
Senior Vice President
AGL RESOURCES INC.
By: /s/ Xxxxxx Xxxxxxx
_______________________________
Xxxxxx Xxxxxxx
Chairman, President and Chief
Executive Officer
77
Schedule 1A
Knowledge
Those having Knowledge at Virginia Natural Gas, Inc.:
Xxxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxx M. Xxxxx
Xxxxxxx X. Xxxxxxx
Those having Knowledge at Consolidated Natural Gas Company:
Xxxxxxx X. Xxx
Xxxxxx X. Xxxxxxxxxxx
Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
Those having Knowledge at AGL Resources Inc.
Xxxxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
Schedule 2.1.2
Working Capital Methodologies
Schedule 2.1.2
Working Capital
CURRENT ASSETS
Cash and temporary cash investments $ 231,000
Accounts receivable
Customers 18,922,000
Unbilled revenues and other 17,198,000
Allowance for doubtful accounts (152,000)
Receivables from affiliated CNG companies 4,131,000
Inventories, at cost
Gas stored (weighted average cost method) 16,226,000
Materials and supplies (average cost method) 537,000
Deferred income taxes -- current (net) 2,082,000
Prepayments and other current assets 422,000
------------------
Total current assets 59,597,000
------------------
CURRENT LIABILITIES
Accounts payable 12,030,000
Payables to affiliated CNG companies 4,204,000
Money Pool Payable 46,698,000
Estimated rate contingencies and refunds 1,638,000
Amounts payable to customers 6,975,000
Taxes accrued 1,860,000
Other current liabilities 11,075,000
------------------
Total current liabilities 84,480,000
------------------
Working Capital $ (24,883,000)
==================
Less: Receivables from affiliated CNG companies $ 4,131,000
Payables to affiliated CNG companies (4,204,000)
Money Pool Payable (46,698,000)
------------------
Adjusted Working Capital $21,888,000
==================
Schedule 3.3
Equity Interests
None.
Schedule 3.4
Conflicts
None.
Schedule 3.6
Other Liabilities or Obligations
1. Those matters disclosed in Schedules 3.7 and 3.18.1.
2. Obligations arising in the ordinary course of performance (not breach) of
the Contracts listed in Schedule 3.9.
Schedule 3.7
Compliance with Law; Litigation
1. In Case No. PUE970617, Annual Informational Filing Based on the 12 months
ended June 30, 1998, the Staff of the State Corporation Commission entered
a report that placed VNG's return on equity (XXX) above the minimum XXX
authorized by the Commission. Consequently, the Staff recommended a
write-down of the unamortized balance of VNG's regulatory asset consisting
of approximately $1.4 million of deferred OPEB expenses that previously
were not recovered through rates. The Commission conducted a hearing during
1999 and a report from the Chief Hearing Examiner is pending. In
anticipation of a potentially adverse ruling by the Commission, VNG
eliminated the unamortized balance of the regulatory asset on its books in
1999 and thereby eliminated the contingent liability.
2. Franchises for the use of the streets, alleys or public grounds have
expired in the following localities:
Virginia Beach (pre-1963 city limits)
Hampton
Williamsburg
Suffolk
Schedule 3.8
Tax Matters
Pending Tax Matters:
Amount Reflected in
Type of Tax Years Involved Amount in Dispute Financials
Virginia Sales & Use Tax 1986-1988 $120,000 $80,000
Management expects to settle the Virginia Sales & Use Tax dispute for less than
the $80,000 reflected in the financial statements.
3.8.3 Tax Returns (see following)
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Form Tax Return Tax Tax Tax Audited Subject
Year Year Year of
1997 1998 1999 Audit
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
1120 U.S. Corporation Income Tax Return X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
720 Quarterly Federal Excise Tax Return X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
CT-186 New York Utility Corporation Franchise Tax Return X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
WV/CNT-112 West Virginia Corporate Income Tax Return X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
WV/BFT-120 West Virginia Business Franchise Tax Return X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
FT-1120 Ohio Corporation Franchise Tax Report X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
103 DMV Special Fuel Report X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
DMV Motor Fuel Road Tax Quarterly Report X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Schedule 9 Statement of Gross Receipts Tax X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Sales and Use Tax X X X 1997, 1998
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Chesapeake X X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Norfolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Suffolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Virginia Beach X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Hampton X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Newport News X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Poquoson X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Williamsburg X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Hanover X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Ashland X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - New Kent X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - Xxxxx City County X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Business License Tax - York County X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Norfolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Chesapeake X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Fredericksburg X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Spotsylvania X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Henrico X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Xxxxxxxx X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Xxxxxxxx X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Hampton X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Poquoson X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - York X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Hanover X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Virginia Beach X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Newport News X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Xxxxxxx City X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Williamsburg X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Xxxxx City County X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Fauquier X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - New Kent X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Property Tax - Suffolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Chesapeake X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Hampton X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Norfolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Virginia Beach X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Hanover X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Suffolk X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Newport News X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Poquoson X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Williamsburg X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Ashland X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - Xxxxxxx City X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Utility Taxes - New Kent X X X
-------------- -------------------------------------------------------- -------- -------- -------- ----------- ----------
Schedule 3.9
Material Contracts
--------------------------------------------------------------------------------------------------------
License or Contract Contract is with Description Effective date (if known)
--------------------------------------------------------------------------------------------------------
DCS AMS Meter testing and proving License 1993
Sonic Nozzel Pvr. Meas. Sys. Inc Meter prover software 1999
Prosonic Provers Conn. Tech., Inc Meter prover software
Synergee Xxxxxx Associates Gas transmission and 11/17/98
distribution modeling
Attachmate Attachmate 3270 emulation software
Sniffer SW Network General Novell Network trouble
shooting software
Ghost Symantec PC Configuration Software
Windows NT Server Microsoft Server Operating System
IBM AS/400 Equipment IBM AS/400 computer maintenance 01/01/99
Xerox 4450 Laser Printer Xerox Maintenance on Xerox Printer 01/01/99
connected to AS/400
DC-2000 Metretek Electronic data gathering 8-1-99
customer gas volumes
Advantex Sftw MDSI Dispatching system software 1-1-99
Advantex Maint. MDSI Dispatching system annual 9-15-99
maintenance
XX-0000 Xxxxxxx Packard Unix operating system
Dispatching system
Oracle 2000 Reports Oracle Report writer for
Dispatching system
Xxxxxx Workstation Service Xxxxxx Associates Gas transmission and 01/07/99
distribution modeling
WinDOT Pipeline Safety Viadata Safety regulation management 02/15/99
Regulations
AS/400 Disaster Recovery Sunguard Disaster recovery AS/400 08/01/95
Microsoft Office Microsoft Office products
OS/400 IBM AS/400 Operating system
Job Manager (AS/400) MBA Job management software AS/400
Page Manager (AS/400) MBA Paging software
XDPE (AS/400 Printing) Xerox Software to run Xerox printer
connected to AS/400
DBU (AS/400) Prodata Data base utility editor
Office Vision 400 IBM AS/400 Office products
Total/400 Strategic Info Disk management software AS/400
Solutions
Itron Premier Plus Itron Corp Meter reading system
Telephone System Switch Lucent Technology Telephone infrastructure
Software
Telephone System Audix Lucent Voice mail
CenterVue Lucent Technologies Call management system
Emerald CAS Verimark Call accounting software
track outgoing calls
Agreements under Pipeline Transportation Service Rate Schedule PT-1:
-------------------------------------------------------------------
1. Amended and Restated Pipeline Transportation Service Agreement between VNG
and Xxxxxxx Limited Partnership, dated as of January 1, 1990.
2. Pipeline Transportation Service Agreement between VNG and the City of
Richmond, dated as of March 15, 1990.
3. Amended and Restated Pipeline Transportation Service Agreement between VNG
and Virginia Electric and Power Company, dated as of April 23, 1990.
4. Pipeline Transportation Service Agreement between VNG and Columbia Gas of
Virginia, Inc., dated as of November 1, 1997.
SCHEDULE 3.9
VNG MATERIAL CONTRACTS
-------------------------------------- ---------------------------------------------- ------------------------
Contract Effective
Vendor Description Date
-------------------------------------- ---------------------------------------------- ------------------------
3E Company MSDs Retrieval, Poison/Spill Service 11/01/99
-------------------------------------- ---------------------------------------------- ------------------------
American Meter Company Domestic Service Regulators 01/01/99
-------------------------------------- ---------------------------------------------- ------------------------
American Payment System, Inc. Payment Processing 05/14/97
-------------------------------------- ---------------------------------------------- ------------------------
Boise Cascade Office Products Corp. Office Supplies 07/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Checkfree Corporation Electronic Payment 06/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Xxxxxx Xxxxxxx Valves Valves and Accessories 12/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Crestar Bank Lock-box Processing 12/31/98
-------------------------------------- ---------------------------------------------- ------------------------
Dresser Manufacturing Division* Bolted Couplings, Clamps, Saddles & Sleeves 09/14/99
-------------------------------------- ---------------------------------------------- ------------------------
Xxxxxx Associates Benefits Administration 11/01/98
-------------------------------------- ---------------------------------------------- ------------------------
IKON Office Solutions Copiers 08/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Invensys Energy Metering (Equimeter) 2000 Annual Meter Requirement 01/11/00
-------------------------------------- ---------------------------------------------- ------------------------
Keystone Pipeline Services, Inc. Pipeline Construction 06/01/99
-------------------------------------- ---------------------------------------------- ------------------------
Xxxxxx Construction Co., Inc. Pipeline Construction 06/01/99
-------------------------------------- ---------------------------------------------- ------------------------
XxXxxxxx Corporation Integrated Supply for gas pipeline materials 03/01/99
and supplies
-------------------------------------- ---------------------------------------------- ------------------------
NOCUTS, Inc. Line Locating 07/01/97
-------------------------------------- ---------------------------------------------- ------------------------
Nordstrom Valves, Inc. Poly, Iron, & Steel Valves 11/15/99
-------------------------------------- ---------------------------------------------- ------------------------
Perfection Corporation Plastic Fittings 07/19/99
-------------------------------------- ---------------------------------------------- ------------------------
Xxxxxxxx Driscopipe, Inc. Polyethylene Pipe 12/15/98
-------------------------------------- ---------------------------------------------- ------------------------
Pitney Xxxxx Facsimile Machines 06/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Xxxx & Sons Utility Contractor, Inc. Pipeline Construction 06/01/99
-------------------------------------- ---------------------------------------------- ------------------------
Xxxxx Xxxxx, Inc. Bolted Couplings, Clamps, Saddles & Sleeves 09/14/99
-------------------------------------- ---------------------------------------------- ------------------------
Stuart Steel Protection Corp. Anodes 07/20/99
-------------------------------------- ---------------------------------------------- ------------------------
UPSCO, Inc. Pre-fabricated Meter Sets 12/23/98
-------------------------------------- ---------------------------------------------- ------------------------
Utilities & Industries, Inc. Meter Repair 04/01/99
-------------------------------------- ---------------------------------------------- ------------------------
Wang Laboratories, Inc. Network Related Services 09/01/98
-------------------------------------- ---------------------------------------------- ------------------------
Xerox Connect Computers & Peripheral Hardware 07/01/99
-------------------------------------- ---------------------------------------------- ------------------------
SCHEDULE 3.9
VNG FIRM GAS PURCHASE AGREEMENTS
AS OF NOVEMBER 1999
PIPELINE QUANTITY
DELIVERED (DthD) TAKE
SUPPLIER INTO MIN MAX FLEXIBILITY PRICE TERM
------------------------------------------------------------------------------------------------------------------------------------
SCEM (Southern Company) Columbia Gulf 0 20,000 Baseload with swing option (1) FOM GDA baseload or daily GDA 11/99-3/00
Reliant Columbia Gulf 0 10,312 Baseload with swing option (1) FOM GDA baseload or daily GDA 11/99-3/00
VPEM (Virginia Power) Columbia Gulf 0 10,000 Baseload with swing option (1) FOM GDA baseload or daily GDA 11/99-3/00
PanCanadian Columbia Gulf 0 10,000 Baseload with swing option (1) FOM GDA baseload or daily GDA 11/99-3/00
Sonat Columbia Gulf 2,700 2,700 Baseload/trigger or settlement NYMEX + .0250 11/99-3/00
Sonat Tennessee 2,300 2,300 Baseload/trigger or settlement NYMEX - .0975 11/99-3/00
Coral Tennessee 5,530 5,530 Baseload/trigger or settlement NYMEX - .1000 11/99-3/00
Engage Tennessee 0 4,970 Baseload with swing option (1) FOM IF baseload or daily GDA 11/99-3/00
swing ($.0125 demand on MDQ)
Xxxxxx Xxxxxxxxx 0 5,436 Baseload with swing option (1) FOM IF baseload or daily GDA 11/99-3/00
swing ($.0050 demand on MDQ
if swing)
CES (Columbia Energy) Tennessee 0 10,444 Baseload with swing option (1) FOM IF baseload or daily GDA 11/99-3/00
swing ($.0100 demand on MDQ
if swing)
Texaco Transco 3,568 3,568 Baseload Fixed at $2.1700 11/99-3/00
Texaco Transco 573 573 Baseload Fixed at $2.2500 11/99-3/00 (2)
Texaco Transco 3,183 3,183 Baseload Fixed at $2.2825 11/99-3/00 (2)
Aquila Transco 4,183 4,183 Baseload Fixed at $2.2475 11/99-3/00 (2)
Aquila Transco 4,116 4,116 Baseload Fixed at $2.2775 11/99-3/00 (3)
------ ------ (3)
TOTAL 26,153 97,315
NOTES (1) Election of baseload or swing on a monthly basis.
(2) Full contract term through 10/2000. Contract reverts to index
commodity plus reservation fee pricing (FOM IF Index and $.04/Dth
on MDQ) after 3/31/2000.
(3) Full contract term through 10/2000. Contract reverts to index
plus reservation fee pricing (combo FOM IF & Natural Gas Week
indices and a load factor based MDQ fee ranging from 3.747% at
100% LF to 6.638% at 40% LF on the commodity price) after
3/31/2000.
SCHEDULE 3.9
VNG FIRM GAS PURCHASE AGREEMENTS
AS OF NOVEMBER 1999
"LF" is "load factor"
"IF" is "Inside FERC"
"GDA" is "Gas Daily Average"
"FOM" is "first of month"
"MDQ" is Maximum Daily Quantity
All contracts contain replacement cost reimbursement clauses in event of
non-force majeure supplier failure and supplier corporate warranty on
performance.
VNG also has a 15,930 DthD bundled firm sales service provided by Xxxxxxxx
Energy Services as agent for Transco using capacity contracted for by VNG
(contract term through 3/31/2004).
SCHEDULE 3.9
INTERSTATE PIPELINE CAPACITY CONTRACTS
AS OF NOVEMBER 1999
FIRM TRANSPORTATION SERVICES
CAPACITY EXPIRATION
PIPELINE SERVICE (DTHD) RATE DATE
CNGT (1) FTNN 19,852 MAX TARIFF 03/31/12
FTNN 20,000 MAX TARIFF 10/31/15
FTNN 13,500 MAX TARIFF 10/31/16
FTNN 5,000 MAX TARIFF 10/31/17
FT 10,000 MAX TARIFF (2) 02/28/05
FTNN-GSS 15,148 MAX TARIFF 03/31/12
FTNN-GSS 20,000 MAX TARIFF 10/31/15
FTNN-GSS 5,000 MAX TARIFF 10/31/17
GATHERING 5,050 MAX TARIFF 03/31/01
TENNESSEE FT-A 25,650 MAX TARIFF 10/31/00 (3)
FT-A 4,599 MAX TARIFF 10/31/00 (3)
FT-A 518 MAX TARIFF 10/31/00 (3)
TEXAS EASTERN FT-1 13,284 MAX TARIFF 10/31/00
TRANSCONTINENTAL FT 556 MAX TARIFF 10/31/12
FT 35,930 MAX TARIFF 03/31/05
FT 14,625 MAX TARIFF 07/31/04
COLUMBIA GAS FTS 57,970 MAX TARIFF 10/31/04
FTS 38,000 FERC APPROVED (4) 10/31/19
SST 49,030 MAX XXXXXX 00/00/00
XXX 14,625 MAX TARIFF 10/31/14
COLUMBIA GULF FTS 51,479 MAX TARIFF 10/31/04
NOTES (1) VNG has a contractual commitment to acquire an additional 15,225
DthD of Rate Schedule FTNN capacity effective 10/31/2000 at
maximum tariff rates for a primary term of 15 years.
(2) This service is available to VNG during December, January and
February only of each year and demand charges are assessed
accordingly.
(3) VNG has renewed only its Tennessee capacity to the South Xxxxxxx
pooling point (the full 21,490 DthD from 11/1/2000 to 3/31/2001
and a reduced level of 4,723 DthD from 4/1/2001 to 10/31/2001) at
discounted rates.
(4) This is a short-haul firm transportation service provided by
Columbia under a unique pricing arrangement pursuant to specific
FERC authorization.
SCHEDULE 3.9
VNG INTERSTATE PIPELINE CAPACITY CONTRACTS
AS OF NOVEMBER 1999
FIRM STORAGE SERVICES
WITHDRAWAL STORAGE
CAPACITY CAPACITY EXPIRATION
PIPELINE SERVICE (DTHD) (Dth) RATE DATE
CNGT (1) GSS 15,148 789,000 MAX TARIFF 03/31/12
GSS 20,000 1,040,000 MAX TARIFF 03/31/15
GSS 13,500 702,000 MAX TARIFF 03/31/16
GSS 5,000 260,000 MAX TARIFF 03/31/17
TRANSCONTINENTAL GSS 2,070 98,893 MAX TARIFF 03/31/13
WSS 8,523 724,500 MAX TARIFF 03/31/98
ESS (2) 8,970 90,254 MAX TARIFF 10/31/13
COLUMBIA GAS FSS 49,030 2,848,655 MAX TARIFF 10/31/04
FSS 14,625 731,250 MAX TARIFF 10/31/14
LNG 52,090 778,500 MAX TARIFF 00/00/00
XXXX XXXXX XXX FPS-1 10,000 100,000 MAX TARIFF 4/15/06
NOTES (1) VNG has a contractual commitment to acquire an additional 15,225
DthD of Rate Schedule GSS deliverability (761,250 Dth capacity)
effective 4/1/2000 at maximum tariff rates for a primary term of
15 years.
(2) This storage service is currently bundled into a 15,930 DthD
Transco/Wesco firm sales service (term through 3/31/2004).
Schedule 3.10
Seller Consents and Approvals
1. Approval of the Virginia State Corporation Commission for the sale of VNG
under Section 56-88.1 of the Code of Virginia and under the Order Approving
Merger dated September 17, 1999, in State Corporation Commission Case No.
PUA990020, Joint Petition of Dominion Resources, Inc. and Consolidated
Natural Gas Company for approval of agreement and plan of merger under
Chapter 5 of Title 56 of the Code of Virginia.
2. Approval of the Securities and Exchange Commission for the sale of VNG
under the Public Utility Holding Company Act of 1935.
3. Approval of the Federal Trade Commission (the "FTC") for the sale of VNG
pursuant to the FTC's Order of November 4, 1999 in FTC File No. 991-0244
and Docket No. C-3901.
Schedule 3.13
ERISA; Employee Plans
3.13.1 List of all Employee Plans
Employee Plans Maintained by CNG
System Pension Plan of Consolidated Natural Gas Company and Its Participating
Subsidiaries for Employees Who Are Not Represented By A Recognized Union
System Thrift Plan of Consolidated Natural Gas Company and Its Participating
Subsidiaries for Employees Who Are Not Represented By A Recognized Union
System Supplemental Early Retirement Plan of Consolidated Natural Gas Company
and Its Participating Subsidiaries
Supplemental Plan for Retirement on Account of Permanent and Total Incapacity
for Service (of The Consolidated Natural Gas System & Its Participating
Subsidiaries for Employees Who Are Not Represented by a Recognized Union)
[System Supplemental Retirement Plan for Certain Management Employees of
Consolidated Natural Gas Company and Its Participating Subsidiaries]*
[System Supplemental Pension and Death Benefit Plan of Consolidated Natural Gas
Company and Its Participating Subsidiaries]*
[Unfunded Supplemental Benefit Plan for Employees of Consolidated Natural Gas
Company and Its Participating Subsidiaries Who Are Not Represented by a
Recognized Union]*
System Disability Benefit Plan of Consolidated Natural Gas Company and Its
Subsidiaries for Employees Who Are Not Represented by a Recognized Union
System LTD Insurance Plan of Consolidated Natural Gas Company and Its
Subsidiaries for Employees Who Are Not Represented by a Recognized Union
System Medical Insurance Plan of Consolidated Natural Gas Company and Its
Participating Subsidiaries for Employees Who Are Not Represented by a Recognized
Union
System Retiree Medical Insurance Plan of Consolidated Natural Gas Company and
Its Participating Subsidiaries for Employees Who Are Not Represented by a
Recognized Union
VEBA of Consolidated Natural Gas Company and Its Participating Subsidiaries for
Non-Union Employees
System Medical Insurance for Persons Eligible for Medicare of Consolidated
Natural Gas Company and Its Participating Subsidiaries
System Flexible Benefit Plan of Consolidated Natural Gas Company and Its
Participating Subsidiaries for Employees Who Are Not Represented by a Recognized
Union
[Consolidated Natural Gas Company Executive Incentive Deferral Plan]*
[System Short Service Supplemental Retirement Plan for Certain Management
Employees of CNG and Its Participating Subsidiaries]*
System Group Life Insurance Plan of Consolidated Natural Gas Company and Its
Participating Subsidiaries for Employees Who Are Not Represented by a Recognized
Union
[CNG Group Life Insurance Plan for Members of the Executive Payroll Group (Split
Dollar Life)]*
System Survivor Benefit Insurance Plan of Consolidated Natural Gas Company and
Its Participating Subsidiaries for Employees Who Are Not Represented by a
Recognized Union
System Accidental Death Insurance Plan of Consolidated Natural Gas Company and
Its Participating Subsidiaries
The CNG System Health Care Spending Plan for Employees Who Are Not Represented
by a Recognized Union
The CNG System Dependent Care Spending Plan for Employees Who Are Not
Represented by a Recognized Union
System Dental Insurance Plan of Consolidated Natural Gas Company and Its
Participating Subsidiaries for Employees Who Are Not Represented by a Recognized
Union
Sick Leave
Paid Holidays
[Trust Agreement Between Mellon Bank and CNG (Rabbi Trust)]*
Hours of Work/Alternate work schedules/Work-at-Home Policy
[Executive Annual Bonus Program]*
Annual Bonus Program for Management or Non-Union Employees
Service Awards
[Retirement and Post-retirement Benefit Plans For Certain Employees of
Consolidated Natural Gas Company and Its Participating Subsidiaries
(non-qualified plan)]*
Ace Award Program
Survivor Support Plan
Personal Computer Purchase Plan
Appliance Purchase Plan
Education Plan of Consolidated Natural Gas Company and Its Participating
Subsidiaries
Employee Foreign Assistance Plan/Program
Company Sponsored Memberships
Consolidated Natural Gas System X.X. Xxxxxxxxx Student Loan Fund (Unfunded Plan)
Consolidated Natural Gas System Foundation (Funded Plan)
[Employee Stock Ownership Plan of Consolidated Natural Gas Company and Its
Participating Subsidiaries]*
[*Note: Applicability of plan depends upon Buyer's offer of employment to some
or all of the Seller Associated Employees listed on Schedule 5.8.1.]
Employee Plans Maintained by VNG
Virginia Natural Gas, Inc. Employee Savings Plan
Virginia Natural Gas, Inc. Retirement Plan
Virginia Natural Gas, Inc. Hourly Savings Plan
Virginia Natural Gas, Inc. Retiree Medical Plan
VNG Union VEBA
Virginia Natural Gas, Inc. Retiree Life Insurance Plan
Severance Pay Policy of Consolidated Natural Gas Company and its Participating
Subsidiaries for Employees who are not Represented by a Recognized Union
Virginia Natural Gas, Inc. Flexible Benefit Plan (Hourly and Salaried Employees)
Virginia Natural Gas, Inc. Tuition Refund Program for Salaried and Hourly
Employees
Virginia Natural Gas, Inc. Air Travel Accident Plan
Employee Service Award Program
Employee Sick Pay Policy
Employee Vacation Pay Policy
Employee Assistance Program
Transfer-Relocation Policy
Company Sponsored Membership Program (Civic)
Employee Matching Gifts Program
Virginia Natural Gas, Inc. Employee Guides for Salaried and Hourly Employees
Recreational Activities
Volunteer Activities
Wellness Program
Employment, Salary Continuation, or Other Agreements
WA Fox
X.X. Xxxxxx
X.X. Xxxxxxx
X.X. Xxxxxxx
X. Xxxxxxxxxxx
X. Xxxxxx
L. Gomto
X. Xxxxxxxx
X.X. Xxxxxxxx
X.X. XxXxxxxx
X.X. Xxxxxxx
X.X. Xxxxxx
X.X. Xxxxxxx
X.X. Xxxxxx
X.X. XxXxxx
X.X. Xxxxxxx
M.T. Xxxxxx
X.X. Xxxx
X.X. Xxxxxxxx
X.X. Xxxxxxxxxx
A.L. Brooke
X.X. Xxxxxxx
X.X. Xxxxx
3.13.11 VNG Employee Pay Scale: See attached.
[CONFIDENTIAL TREATMENT REQUESTED]
Schedule 3.14
Events Subsequent to December 31, 1999
On March 15, 2000, the Board of Directors of Virginia Natural Gas, Inc. declared
a common stock dividend of $3,504,164.00 payable May 15, 2000 to all
stockholders of record on April 17, 2000.
Schedule 3.15
Permitted Liens
None.
Schedule 3.16
Insurance
VIRGINIA NATURAL GAS - Insurance In-Force
-------------------------------------------------------------------------------------------------------------------------------
Policyholder Coverage Broker Insurer Policy Policy Amt. Of Deductible
Description Number Period Coverage
-------------------------------------------------------------------------------------------------------------------------------
Consolidated Directors & XxXxxxx, Xxxxxxx Chubb 8142-04-02B 28-Jan-00 $25,000,000 $0 Insured Persons
Natural Gas Officers - & Xxxxxxxx 28-Jan-06 $500,000 Corporate
Company "Run-Off"
AEGIS D0017A1A98 28-Jan-00 $35,000,000 NA
00-Xxx-00
XXX 000000-00XX 28-Jan-00 $65,000,000 NA
28-Jan-06
St. Xxxx 900DX0248 28-Jan-00 $25,000,000 $25,000
28-Jan-06
Consolidated Fiduciary XxXxxxx, Seibels Chubb 8142-04-02B 28-Jan-00 $25,000,000 $25,000
Natural Gas Liability - & Xxxxxxxx 28-Jan-06
Company "Run-Off"
AEGIS F0017A1A99 28-Jan-00 $35,000,000 NA
28-Jan-06
Dominion Directors & XxXxxxx, Seibels Chubb 8152-85-82 1-Sep-98 $25,000,000 $0 Insured Persons
Resources, Officers & Xxxxxxxx 1-Sep-01 $1,000,000 Corporate
Inc.
AEGIS D056A1A98 1-Sep-98 $25,000,000 NA
0-Xxx-00
XXX 000000-00XX 1-Sep-98 $50,000,000 NA
1-Sep-01
Zurich DOC272557300 1-Sep-98 $25,000,000
1-Sep-01
Chubb 8152-85-83 1-Sep-98 $25,000,000
1-Sep-01
CNA 171473880 1-Sep-98 $25,000,000
1-Sep-01
XXXX 000-000000-00 1-Sep-98 $25,000,000
1-Sep-01
X.L. ELU8165400 28-Jan-00 $50,000,000
Insurance Co. 1-Sep-01
Dominion Fiduciary XxXxxxx, Seibels Chubb 8152-85-84 1-Sep-98 $25,000,000 $25,000 Indemnifiable
Resources, Liability & Xxxxxxxx Losses
Inc. 1-Sep-01 $0 Unindemnifiable
Losses
Travelers 76FF101080834BCM 1-Sep-98 $25,000,000
1-Sep-01
AEGIS F0568A1A97 1-Sep-98 $25,000,000 NA
1-Sep-01
Dominion Blanket Crime XxXxxxx, Seibels Chubb 8152-85-84 1-Sep-98 $25,000,000 $250,000
Resources, & Xxxxxxxx 1-Sep-01
Inc.
Royal & PSF001748 28-Jan-00 $25,000,000 NA
SunAlliance 1-Sep-01
Dominion Special Crime XxXxxxx, Seibels Chubb 8160-94-51 1-Jul-99 $25,000,000 None
Resources, & Xxxxxxxx
Inc. 1-Jul-02
Dominion Excess Liability XxXxxxx, Seibels AEGIS X008A1A00 28-Jan-00 $35,000,000 $2,000,000 per occ.
Resources, & Xxxxxxxx ($1,000,000 Employers
Inc. Xxxxxx Xxxxxxx Liability)
1-Sep-00 $4,000,000 agg.
$250,000 maintenance
EIM 500828-98GL 1-Sep-98 $100,000,000 NA
1-Sep-01
Primary Pkg- 1-Apr-00 $215,000,000 NA
Section III 1-Sep-01
Excess Pkg 1-Apr-00 $250,000,000 NA
1-Sep-01
Consolidated Excess Workers' XxXxxxx, Xxxxxxx AEGIS C0017A199 1-Sep-99 $35,000,000 $250,000
Natural Gas Compensation & Xxxxxxxx
Company Xxxxxx Xxxxxxx 1-Sep-00
Consolidated Automobile XxXxxxx, Seibels Liberty Mutual AS2-681-004097-169 1-Sep-99 None NA
Natural Gas Liability & Xxxxxxxx
Company (Fronting Policy) 1-Sep-00
Dominion Property & Xxxxxx Xxxxxxx Primary Pkg 1-Apr-00 $350,000,000 $2,000,000 per occ.
Resources, Operators
Inc. Extra Expense XxXxxxx, Xxxxxxx Section I & II 1-Sep-01 $4,000,000 agg.
& Xxxxxxxx $250,000 maintenance
Excess Pkg. 1-Apr-00 $250,000,000 NA
1-Sep-01
Dominion Employers XxXxxxx, Xxxxxxx Liberty Mutual WC2-681-004097-059 1-Mar-99 $1,000,000 None
Resources, Liability & Xxxxxxxx
Inc. All States 1-May-00
Consolidated OAD&D AON Employee Zurich GTU0013681 1-May-97 Various None
Natural Gas Benefits Insurance
Company Consulting Grouop 1-May-00
Schedule 3.18.1
Compliance with Environmental Laws
1. Mercury Seal Regulators. VNG has approximately 5,000 mercury seal
regulators remaining within its distribution system. These house regulators
were conventional equipment at the time they were installed. Mercury seal
regulators can, under certain environmental and physical circumstances,
result in the over pressurization of natural gas equipment installed
downstream of the regulator. Because the SCC raised a concern about these
regulators generally with all Virginia jurisdictional gas utilities, VNG
voluntarily instituted a program in 1994 of removing all remaining mercury
seal regulators on its system. All regulators being installed today on
residential services are of a modern diaphragm design.
2. Mercaptan. Because the natural gas stream received from the interstate
pipeline system is not odorized, VNG adds an odorant, Mercaptan, at its
gate stations where ownership and custody of interstate natural gas is
transferred to VNG.
In 1996, VNG discovered that a quantity of liquid Mercaptan had leaked
over a long period of time from the odorant injection equipment at VNG's
Norfolk Gate Station, adjacent to the Chesapeake Propane Plant. Following
the removal of contaminated soils, testing and continuous monitoring
determined that some of the liquid had reached certain ground water
aquifers. In 1998 VNG began a bioremediation process that is cleansing the
groundwater of the odorant. All environmental activity at the site of the
leak has been voluntary and conducted with the knowledge and approval of
the Virginia Department of Environmental Quality and local municipal
agencies. The bioremediation program is anticipated to remain in place into
2000. No regulatory enforcement action has occurred to date and none is
expected.
3. Manufactured Gas Facilities. As a local distribution company in
southeastern Virginia with a history that goes back nearly 100 years,
Affiliates of VNG owned and operated two manufactured gas plants (MGP)
where gas was made through a process of heating coal and heavy petroleum
products. The plants, in Newport News and Norfolk, Va., were owned by
Virginia Power, a subsidiary of Dominion Resources, Inc. ("DRI"), which
conducted natural gas distribution operations through an operating division
that is now VNG. The manufactured gas plants were taken out of service and
dismantled in the early 1960s, prior to VNG's incorporation as a separate
corporate entity in 1983. VNG never owned record title to either of the
plants. Two additional sites, in Chesapeake and Suffolk, where MGP waste
products (principally coal tars) were stored or disposed of, were owned
briefly by VNG between 1986 and 1990, but were subsequently conveyed to
Virginia Power and Dominion Lands, Inc., respectively.
When VNG was sold to CNG by DRI in January 1990, CNG, DRI and VNG
entered into an environmental sharing agreement that allocates between the
parties financial responsibility for all environmental costs associated
with the Manufactured Gas Facilities, up to a total of $15 million. To
date, the parties have spent approximately $2.8 million under the sharing
agreement.
Schedule 3.18.2
MGP Sites
Manufactured Gas Facilities. As a local distribution company in
southeastern Virginia with a history that goes back nearly 100 years, Affiliates
of VNG owned and operated two manufactured gas plants (MGP) where gas was made
through a process of heating coal and heavy petroleum products. The plants, in
Newport News and Norfolk, Va., were owned by Virginia Power, a subsidiary of
Dominion Resources, Inc. ("DRI"), which conducted natural gas distribution
operations through an operating division that is now VNG. The manufactured gas
plants were taken out of service and dismantled in the early 1960s, prior to
VNG's incorporation as a separate corporate entity in 1983. VNG never owned
record title to either of the plants. Two additional sites, in Chesapeake and
Suffolk, where MGP waste products (principally coal tars) were stored or
disposed of, were owned briefly by VNG between 1986 and 1990, but were
subsequently conveyed to Virginia Power and Dominion Lands, Inc., respectively.
When VNG was sold to CNG by DRI in January 1990, CNG, DRI and VNG entered
into an environmental sharing agreement that allocates between the parties
financial responsibility for all environmental costs associated with the
Manufactured Gas Facilities, up to a total of $15 million. To date, the parties
have spent approximately $2.8 million under the sharing agreement.
See items (a) through (d) in the definition of Manufactured Gas Facilities
for additional descriptions of these four MGP sites.
Schedule 3.19
Intellectual Property
VNG Intellectual Property - U.S. Service Marks:
1. U.S. Service Xxxx Registration No. 1,716,672: THE GREAT CHEFS OF HAMPTON
ROADS (renewal required 9/15/02)
VNG Intellectual Property - Common Law Service Marks:
1. VIRGINIA NATURAL GAS
2. Blue Flame Logo (design xxxx)
Schedule 3.19 (cont'd)
VNG Intellectual Property - Software (owned by VNG - no payment obligations):
--------------------------- ---------------------------------------------------- -----------
Software Description Platform
--------------------------- ---------------------------------------------------- -----------
CSS Customer Service System - Customer billing and Mainframe
information system
--------------------------- ---------------------------------------------------- -----------
AGES Automated Gas Estimating System - work management AS/400
and tracking system for new gas construction
--------------------------- ---------------------------------------------------- -----------
Vehicle Time Track vehicle usage/mileage AS/400
--------------------------- ---------------------------------------------------- -----------
Contractor Cost Invoice/pay contractors AS/400
--------------------------- ---------------------------------------------------- -----------
Marketing Track service and appliance installation AS/400
--------------------------- ---------------------------------------------------- -----------
Safety Drug/Alcohol testing and Vehicle Usage Tracking AS/400
--------------------------- ---------------------------------------------------- -----------
Transportation Vehicle Tracking, Maintenance Scheduling AS/400
--------------------------- ---------------------------------------------------- -----------
Building Maintenance Work order processing AS/400
--------------------------- ---------------------------------------------------- -----------
Time & Attendance Time & Attendance Tracking, OT meals, Temporary AS/400
Assignments
--------------------------- ---------------------------------------------------- -----------
Meter Shop Inventory, Meter Repair Tracking AS/400
--------------------------- ---------------------------------------------------- -----------
Public Relations NGV and Pilot Labels AS/400
--------------------------- ---------------------------------------------------- -----------
Cathodic Protection Track Test Stations, Leaks, Insulated Services, AS/400
etc.
--------------------------- ---------------------------------------------------- -----------
Correspondence Print correspondence letters for AGES and CSS AS/400
--------------------------- ---------------------------------------------------- -----------
Miscellaneous IT Programs Change control, Off loads, System backups, etc. AS/400
--------------------------- ---------------------------------------------------- -----------
Schedule 3.19 (cont'd)
Copyrights:
1. Copyrights in the contents of the web page and all sub-pages commencing
with the URL address: xxxx://xxx.xxx.xxx/xxx/, as more specifically
described in the Intellectual Property Assignment Agreement between Seller
and VNG.
CNG Proprietary Software (owned by Seller and licensed to VNG - no payment
obligations):
EDI Software
Third Party Software Licensed to VNG (Items in this category do carry payment
obligations for license and/or maintenance fees):
See Schedule 3.9 (Material Software Contracts)
Third Party Software Licensed to CNG (to be used by VNG or by CNG for the
benefit of VNG in connection with the Transition Services Agreement.) (Items in
this category do carry payment obligations for license and/or maintenance fees):
------------------------------------------ -------------------------------------
Name of Owner/Licensor Product
------------------------------------------ -------------------------------------
Isogon Corporation Soft/Audit
------------------------------------------ -------------------------------------
Computer Associates International, Inc. CA-One PROAUDITPROEDIT DB2
PRO-SECURE
CA-MICS
MIM
TSOMON
------------------------------------------ -------------------------------------
Compuware Corporation Abend-AID/XLS, FileAID/ MVS,
------------------------------------------ -------------------------------------
Chicago-Soft, Ltd. MVS/QuickRef
------------------------------------------ -------------------------------------
Innovation Data Processing, Ltd. Compaktor
FDR/ABR
FATS/FATAR
------------------------------------------ -------------------------------------
GT Software, Inc. GT Assist
------------------------------------------ -------------------------------------
SAS Institute Inc. Base SAS
SAS/FSP
------------------------------------------ -------------------------------------
Candle Corporation Omega View
Candle
Command
Center for MQSeries
OME-XXXXX for CICS
OME-XXXXX for MV
OME-XXXXX for SMS
Performance
PAC for DB2
------------------------------------------ -------------------------------------
Viasoft, Inc. VIA/Insight
SmartEdit
SmartTest
SmartDoc
------------------------------------------ -------------------------------------
International Business Machines ACF (NCP)
Corporation ACF (SSP)
Advantis
CICS (4.1)
COBOL (II)
Common Xxxx Print (AFP)
DB2 (4.1)
DCF
DFSort
GPAR
GTF
IXFP
JES328x
MQ Series
Net View
OGL (370)
OS (390)
PMF
PSAF
PSF
QMF
SDSF
Security Server (RACF)
Software
Xcel
TSO PCF
------------------------------------------ -------------------------------------
Serena Software International Comparex
------------------------------------------ -------------------------------------
BMC Software, Inc. /New Dimensions BMC Utilities
BMCDSN Command Processor for DB2
Catalog Manager/DB2
Change Manager for DB2
CONTROL-D
CONTROL-D PC
CONTROL-M
CONTROL-O
Copy Plus for DB2
DASD Manager Plus/DB2
Extended Buffer Manager for DB2
LoadPlus for DB2
Patrol DB-LOG Master for DB2 for MVS
Quickstart
Recover Plus for DB2
Recovery Manager for DB2
REORG Plus for DB2
Unload Plus for DB2
------------------------------------------ -------------------------------------
Bottomline Technologies PayBase (at Corp)
------------------------------------------ -------------------------------------
Princeton Softech, Inc. Move
Access
Compare for DB2
------------------------------------------ -------------------------------------
OptiSystems, Inc. Energizer
CICS
------------------------------------------ -------------------------------------
Group 1 Software, Inc. Code-1 Plus
Mailstream
Plus
Postnet
Barcode
Bar-coded bag tray tag option
------------------------------------------ -------------------------------------
Neles (Valmet) Automation, Inc. Valmet Scada
------------------------------------------ -------------------------------------
PeopleSoft, Inc. PeopleSoft
HRMS
------------------------------------------ -------------------------------------
Oracle Corp. Oracle
Oracle 2000 Reports
Oracle Database
Xxxxx
------------------------------------------ -------------------------------------
LPC, Inc. (became Pitney Xxxxx Software Finalist and Mailer's Choice
Systems, now DocSense)
------------------------------------------ -------------------------------------
Ceridian Time & Attendance (includes ATA LMPlus C/S
former EAS software) Professional
CNGT Version
------------------------------------------ -------------------------------------
Smallworld Systems, Inc. Smallworld
------------------------------------------ -------------------------------------
Diversified Software Systems, Inc. JobScan
------------------------------------------ -------------------------------------
Xxxxxxx Kodak, Inc. PME
------------------------------------------ -------------------------------------
M&I Data Services Custom Statement Formatter
------------------------------------------ -------------------------------------
Vanguard Integrity Professionals Vanguard RACF
Administrator
------------------------------------------ -------------------------------------
Xxxx Systems, Inc. XXXX/
XXXX
------------------------------------------ -------------------------------------
Novell, Inc. Novell Replication Services
(NRS)
------------------------------------------ -------------------------------------
Axent Technologies, Inc. Enterprise Security Manager (ESM) and
Intruder Alert (ITA)
------------------------------------------ -------------------------------------
Attachmate Corporation NRS and Net Wizard
------------------------------------------ -------------------------------------
Security Dynamics, Inc. ACE Admin
(parent:Solw@Communications, Ltd.) (SecurID
token cards)
------------------------------------------ -------------------------------------
Information Systems Manager, Inc. PerfMan
------------------------------------------ -------------------------------------
Schedule 4.4
Buyer Consents and Approvals
1. Approval of the Virginia State Corporation Commission for the purchase of
VNG under Section 56-88.1 of the Code of Virginia.
2. Registration under the Public Utility Holding Company Act of 1935, as
amended ("PUHCA").
3. Approval of the Securities and Exchange Commission for the purchase of VNG
under PUHCA.
Schedule 4.8
Buyer Litigation
None.
Schedule 5.8.1
Associated Seller Employees
Employee Title
-------- -----
Xxxxxxx X. Xxx Xx. Vice President and CEO
Xxxxxx X. Xxxxxxxxxxx Chief Counsel and Secretary
Xxxxxxxx X. Xxxx Regional Network Service Manager
Xxxxxxx X. Xxxxxx Director of Information Technology (VNG)
Xxxxxxx X. Xxxxxx Xx. Senior Systems Analyst
Xxxxxxx X. XxXxxx Senior Systems Analyst
Xxxxxx X. Xxxxxxx Senior Systems Analyst
Xxxxxxx X. Xxxxxxxx III System Administrator
Xxxxxxx X. Xxxxxx Lead Sourcing Agent
Xxxxx X. Xxxxxx Senior Buyer
Xxxx X. Xxxxxxxx Buyer
Xxxxx X. Xxxxxx Xx. Regional Telecommunications Coordinator
Xxxx X. Xxxxxxxxxx Telecommunications Assistant
Schedule 5.8.4
List of Employee Benefit Plans For Which
VNG/Buyer Has Responsibility Following Closing
Employee Plans Maintained by VNG
Virginia Natural Gas, Inc. Employee Savings Plan
Virginia Natural Gas, Inc. Retirement Plan
Virginia Natural Gas, Inc. Hourly Savings Plan
Virginia Natural Gas, Inc. Retiree Medical Plan
VNG Union Employee-Pay-All Plan and VEBA
Virginia Natural Gas, Inc. Retiree Life Insurance Plan
Severance Pay Policy of Consolidated Natural Gas Company and its
Participating Subsidiaries for Employees who are not Represented by a
Recognized Union
Virginia Natural Gas, Inc. Flexible Benefit Plan (Hourly and Salaried Employees)
Virginia Natural Gas, Inc. Tuition Refund Program for Salaried and Hourly
Employees
Virginia Natural Gas, Inc. Air Travel Accident Plan
Employee Assistance Program
Employee Service Award Program
Employee Sick Pay Policy
Employee Vacation Pay Policy
Transfer-Relocation Policy
Company Sponsored Membership Program (Civic)
Employee Matching Gifts Program
Virginia Natural Gas, Inc. Employee Guides for Salaried and Hourly Employees
Recreational Activities
Volunteer Activities
Wellness Program
Schedule 6.4
Required Seller Consents and Approvals
1. Approval of the Virginia State Corporation Commission for the sale and
purchase of VNG under Section 56-88.1 of the Code of Virginia and under the
Order Approving Merger dated September 17, 1999, in State Corporation
Commission Case No. PUA990020, Joint Petition of Dominion Resources, Inc.
and Consolidated Natural Gas Company for approval of agreement and plan of
merger under Chapter 5 of Title 56 of the Code of Virginia.
2. Approval of the Securities and Exchange Commission for the sale and
purchase of VNG under the Public Utility Holding Company Act of 1935
("PUHCA").
3. Approval of the Federal Trade Commission (the "FTC") for the sale of VNG
pursuant to the FTC's Order of November 4, 1999 in FTC File No. 991-0244
and Docket No. C-3901.
4. Registration by Buyer under PUHCA.
5. All approvals and waiting periods under the HSR Act have been obtained or
have expired.
6. Any material consents or approvals pursuant to laws or regulations enacted
subsequent to the date hereof and before Closing.
Exhibit 5.11.1
Form of Transition Services Agreement
TRANSITION SERVICES AGREEMENT
This Transition Services Agreement (the "Agreement") dated as of
___________, 2000, is made between VIRGINIA NATURAL GAS, INC., a Virginia
corporation ("VNG"), and CONSOLIDATED NATURAL GAS COMPANY, a Delaware
corporation ("CNG").
RECITALS
A. VNG, CNG, Dominion Resources Inc., a Virginia corporation, and AGL
Resources, Inc., a Georgia corporation ("AGL"), have entered into a Stock
Purchase Agreement dated as of May 5, 2000 (the "Purchase Agreement"), providing
for the sale by CNG to AGL, of all of the stock in VNG on the terms and
conditions specified therein.
B. As a condition to the respective obligations of the parties to the
Purchase Agreement to consummate the transactions contemplated therein, the
Purchase Agreement requires the execution and delivery of this Agreement
pursuant to which CNG agrees to provide VNG certain transition services upon the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and agreements herein contained, the parties hereto agree as follows:
1. Definitions.
Terms used herein and not otherwise defined herein shall have the meanings
ascribed to them in the Purchase Agreement. In addition, the following terms, as
used herein, have the following meanings:
"Cost" means for any Transition Service rendered hereunder, (a) the cost
assigned to such Transition Service on Schedule A attached hereto, or (b) if no
cost is so assigned on Schedule A, then the allocable portions of the wages,
employee benefits, incentives and other payments to CNG employees, including
occupancy costs related to such CNG employees, and the allocable portions of any
direct variable costs and fixed operating costs (including, without limitation,
fees, taxes, charges, depreciation, overheads, service fees, and expenses)
incurred by CNG in supplying such Transition Service, all determined in a manner
consistent with CNG's cost accounting practices.
"Effective Date" means the Closing Date.
"Transition Services" means those services more particularly described on
Schedule A attached hereto.
2. Term of Agreement.
This Agreement shall be effective beginning on the Effective Date and shall
continue for a period of up to one year following the Effective Date (the period
during which this Agreement remains effective being referred to herein as the
"Term"). This Agreement shall be terminable: (a) by either party immediately
upon written notice to the other party if the other party shall file or have
filed against it any petition under the bankruptcy laws of the United States; or
(b) according to the terms set forth in Paragraph 4. In addition, this Agreement
shall be terminable with respect to any particular Transition Service upon two
weeks' notice by VNG to CNG. Notwithstanding anything to the contrary set forth
herein, so long as either party hereto has any executory obligations incurred
during the Term, this Agreement shall remain in effect to govern such
obligations.
3. Transition Services.
During the Term of this Agreement, CNG or its Affiliates shall provide
Transition Services to VNG according to the terms set forth hereunder and on
Schedule A attached hereto. The quality and level of such Transition Services
shall be substantially the same as such services provided by CNG to VNG prior to
the date hereof; provided, however, the quality or level of such services shall
at a minimum be commercially reasonable. VNG shall pay CNG an amount equal to
the sum of (a) the Cost of each Transition Service listed on Schedule A and (b)
all reasonable travel expenses incurred by CNG's employees and contractors in
connection with providing each Transition Service to VNG hereunder. CNG will
invoice VNG for those Transition Services provided by CNG and listed on Schedule
A attached hereto, and such invoice shall be payable in cash within 15 days
after VNG receives such invoice. Each such invoice shall: (i) identify the
applicable Transition Service to which the invoice relates, (ii) provide summary
details of the fees and expenses payable for each Transition Service invoiced,
and (iii) specify the total amount payable by VNG to CNG.
4. Termination for Cause.
Either party may terminate this Agreement immediately by written notice to
the other party if the other party breaches a material provision of this
Agreement and the breach continues for more than five (5) business days after
delivery of notice of such breach. Notwithstanding the foregoing, however, if
the breaching party is making a good faith effort to cure such breach it shall
be provided an additional reasonable amount of time to do so (not to exceed
thirty (30) days) without triggering immediate termination.
5. Effect of Termination or Expiration.
If this Agreement shall terminate as set forth in Paragraph 2 or Paragraph
4, it shall terminate in its entirety, and no further obligation shall exist on
the part of either party under this Agreement, except that VNG shall be
obligated to pay all outstanding amounts due under this Agreement.
Notwithstanding anything else contained in this Agreement, termination or
expiration of this Agreement shall not act as
2
a waiver by either party of any breach of this Agreement by the other party
hereto through the date of such termination or expiration of this Agreement.
6. Force Majeure.
(a) CNG may suspend or reduce, in whole or in part, the supply of any
or all of the Transition Services or the performance of any of its
obligations hereunder to the extent CNG is impeded in its ability to
provide such Transition Service as a result of a Force Majeure Event.
Notwithstanding the foregoing, CNG agrees to use commercially reasonable
efforts to comply with the terms and conditions of this Agreement to the
extent that it is able to do so. For purposes of this Agreement, the term
"Force Majeure Event" includes, but is not limited to: (i) fire, explosion,
storm damage, flood, or other casualty; (ii) labor troubles including
strikes, lockouts or slowdowns; (iii) government intervention (not
including fines for violations of permits), government regulation or
statute; (iv) war, sabotage, riot, or other civil disturbance; or (v) other
cause or conditions beyond CNG's reasonable control. CNG shall take
reasonable steps to mitigate any damages accruing to VNG as a result of
CNG's inability to comply with the terms and conditions of this Agreement
as a result of a Force Majeure Event and to perform its obligations as
promptly as reasonably practicable after the elimination of the Force
Majeure Event.
(b) During any period in which any Transition Services are reduced or
suspended pursuant to Section 6(a), VNG shall not be obligated to pay for
any Costs with respect to the reduced, suspended or terminated portion of
such Transition Services.
(c) CNG covenants that it will maintain its present or comparable
replacement disaster recovery program and in the event that a Force Majeure
Event occurs which is included in the current CNG disaster plan, CNG will
make the benefits of its disaster recovery program available to VNG in
accordance with the other terms of this Agreement.
7. Limitation of Liability.
(a) Neither CNG, nor its Affiliates, employees or agents shall be
liable to VNG for, and VNG releases and discharges CNG, its Affiliates,
employees and agents from, any and all claims, liabilities, actions, suits,
judgments, losses, injuries, damages (including, without limitation,
incidental or consequential damages), costs and expenses arising out of or
connected with any act or omission, of CNG, its Affiliates, employees or
agents, with respect to the Transition Services, or any failure to provide
the Transition Services to VNG, other than a refusal by CNG in breach of
this Agreement, or gross negligence or willful misconduct of CNG, its
Affiliates, employees or agents.
(b) VNG shall not use the Transition Services for any purpose other
than in connection with the operation of its internal business. VNG will
3
indemnify CNG against any loss, damage or expense incurred by CNG as a
result of VNG's willful, improper use or employment of any of the
Transition Services in contravention of the provisions of this Agreement.
8. Warranties.
CNG warrants that it will make commercially reasonable efforts to provide
for the maintenance of all software in a normal operating state. Except as
provided in the foregoing sentence, the parties expressly agree that no warranty
shall be implied under this Agreement, whether warranties of utility, fitness
for any particular purpose, merchantability, or any other type and, further,
that no warranties of any sort are made herein.
9. Cooperation.
If, after the date hereof, the parties determine that additional services
and functions need to be provided by CNG to VNG during the Term of this
Agreement, each of CNG and VNG agrees to use commercially reasonable efforts to:
(a) cause CNG to provide to VNG such services or functions, as
applicable, and
(b) agree on fair pricing for such services or functions.
10. Notices.
All notices and other communications required or permitted hereunder shall
be in writing (including telex, telefax or similar writing) and shall be given:
If to CNG to:
Consolidated Natural Gas Company
c/o Dominion Resources, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxx, Vice President & General Counsel
Facsimile: (000) 000-0000
with a copy to:
McGuire, Woods, Battle & Xxxxxx LLP
One Xxxxx Center
000 Xxxx Xxxx Xxxxxx
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
4
If to VNG to:
Virginia Natural Gas, Inc.
c/o AGL Resources, Inc.
000 Xxxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Senior Vice President and Counsel
Facsimile: (000) 000-0000
with a copy to:
Long Xxxxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
Facsimile: (000) 000-0000
or to such other person or to such other address or telefax number as the party
to whom such notice is to be given may have furnished the other parties in
writing by like notice. If mailed, any such communication shall be deemed to
have been given on the third business day following the day on which the
communication is posted by registered or certified mail (return receipt
requested). If given by any other means it shall be deemed to have been given
when received.
11. Interpretation.
The headings contained in this Agreement are for reference purposes only
and shall not affect the meaning or interpretation of this Agreement.
12. Miscellaneous.
This Agreement (a) together with the Purchase Agreement and the Related
Agreements, constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof; (b) is an independent agreement, the
rights and obligations of the parties to which shall not be affected by any
provision of, or remedy arising under or with respect to, the Purchase Agreement
or any other agreement between the parties, except to the extent expressly
provided in any such agreement; (c) is not intended to and shall not confer upon
any other person or business entity, other than the parties hereto or any
permitted assignees, any rights or remedies with respect to the subject matter
hereof; (d) shall not be assigned by operation of law or otherwise by either
party without the express written prior approval of the other party, which
approval shall not be unreasonably withheld, except that CNG may assign all or
any portion of its rights hereunder or obligations to one or more Affiliates;
(e) shall be governed by and construed in accordance with the laws of the
Commonwealth of Virginia without regard to its conflicts of law or choice of law
rules; and (f) is not intended to and shall not be deemed to create an
employment relationship between VNG and the employees, agents, or both, of CNG
5
or any Affiliate or Subsidiary of CNG who perform Transition Services pursuant
to the terms and conditions of this Agreement.
6
13. Counterparts.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
7
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized officers.
CONSOLIDATED NATURAL GAS COMPANY
By:___________________________
Name:
Title:
VIRGINIA NATURAL GAS, INC.
By:___________________________
Name:
Title:
8
SCHEDULE A
Transition and Support Services Schedule
Service Type Application/System FTEs Required Total Monthly Cost
Resident Staff Services:
Supervision 1.00 $11,760
Staff Support CSS 3.00 $18,480
Auto Dispatching System 1.00 $7,560
AS/400 Support 2.00 $15,960
Total Resident Staff Services 7.00 $53,760
Dominion Services Support:
SCADA 0.25 $1,250
Peoplesoft support 0.50 $29,035
Oracle Financials 1.50 $66,008
Xxxx Support 0.50 $9,310
Telecom Support 2.00 $12,263
Network Services 1.00 $10,208
Data Center 3.50 $81,775
System Admin 1.00 $8,165
Internet/Intranet 0.50 $4,166
Wang Contract 4.00 $54,500
Total Dominion Services Support 14.75 $276,680
Total Transition/Support Services 21.75 $330,440
Exhibit 5.11.2
Form of Software License Agreement
EDI SOFTWARE LICENSE AGREEMENT
THIS EDI SOFTWARE LICENSE AGREEMENT (this "Agreement") is made and entered
into this _____ day of _______________, _____, by and between Consolidated
Natural Gas Company, a corporation duly organized and existing under the laws of
the State of Delaware and having its principal office at 000 Xxxxxxx Xxxxxx,
Xxxxxxxxxx, Xxxxxxxxxxxx 00000-0000, Xxxxxx Xxxxxx of America (hereinafter
"Licensor"), and Virginia Natural Gas, Inc., a corporation duly organized and
existing under the laws of the Commonwealth of Virginia and having its principal
office at 0000 X. Xxxxxxxx Xxxxx Xxxx., Xxxxxxx, Xxxxxxxx 00000-0000
(hereinafter "Licensee").
Recitals of the Parties
WHEREAS, Licensor is the developer and owner of a proprietary electronic
data interchange software program known as EDI (hereinafter, the "EDI
Software");
WHEREAS, Licensee is desirous of obtaining a license to use the EDI
Software in its business; and
WHEREAS, Licensor is willing to grant such a license to Licensee on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
ARTICLE I
Definitions
In addition to terms elsewhere defined in this Agreement, the following
terms shall have the meanings set forth in this Article I for purposes of this
Agreement:
1.1. "Licensee Equipment." The Local Area Network (LAN) central processing
units (CPUs), including all terminals, and other components thereof, situated at
Licensee Premises and more fully described at Schedule A attached hereto, on
which the EDI Software is installed, operated, and maintained.
1.2. "Licensee Personnel." All persons engaged from time to time as
officers, employees, agents, or independent contractors of Licensee.
1.3. "Licensee Premises." Those premises occupied by Licensee at 0000 X.
Xxxxxxxx Xxxxx Xxxx., Xxxxxxx, Xxxxxxxx.
1.4. "LAN." A limited-distance distributed processing network that
comprises the Licensee Equipment and supporting communication facilities
interconnected by a transmission medium in order to facilitate the interexchange
of data.
ARTICLE II
Grant of License to Licensee
2.1. Scope of License. Licensor hereby grants to Licensee a perpetual,
royalty-free, nonexclusive license to install, execute, and use the EDI Software
on Licensee Equipment at Licensee Premises, to make copies required for such
use, including copies for archival and backup purposes, to create derivative
works thereof, and to sublicense the EDI Software and any derivative works
thereof to subsidiaries of Licensee, all in accordance with terms and conditions
hereof. If Licensee is owned by a parent corporation that operates a centralized
information systems office, the definitions of "Licensee Equipment" and
"Licensee Premises" shall be understood to include such centralized information
systems equipment and office, respectively, but the only permitted uses of the
software on any Licensee Equipment or on any Licensee Premises shall be for
Licensee's benefit. Nothing herein shall be interpreted to permit use of the EDI
Software for the benefit of any person or entity other than Licensee or its
permitted sublicensees.
2.2. Sublicenses. Licensee agrees that any sublicense granted hereunder
shall contain provisions with respect to use and protection of trade secrets at
least as restrictive as those contained in Article IV hereof. Licensee shall not
grant its sublicensees the right to further sublicense the EDI Software or any
derivative works.
ARTICLE III
Limited Warranties; Limitations on Liability
3.1 Limited Warranty. Licensor warrants that it is owner of the EDI
Software, that it has the right to convey the licenses set forth in Section 2.1
hereof, and that to the best of its knowledge, the Licensee's use of the EDI
Software in accordance with the terms of this Agreement shall not infringe any
third-party rights in copyrights or trade secrets in the United States. Other
than the warranties specifically set forth in the foregoing sentence (the
"Limited Warranties"), Licensor is providing the EDI Software licensed hereunder
on an "as is" basis. Excluding the Limited Warranties, Licensor disclaims all
warranties relating to the EDI Software licensed hereunder, including all
implied warranties of merchantability and fitness for a particular purpose.
3.2. Limitation on Liability. In no event shall Licensor be liable for any
indirect, exemplary, incidental, or consequential damages arising out of or
otherwise relating to the use or performance of the EDI Software or any
components thereof, however caused, even if Licensor has been advised of the
possibility or likelihood of such damages.
ARTICLE IV
Licensee's Use and Protection of Trade Secrets
4.1 Acknowledgment of Proprietary Materials; Limitations on Use. Licensee
acknowledges that the EDI Software, including any derivative works thereof, and
all associated intellectual property rights, are the property of Licensor and
that Licensor holds the copyright interests therein, the EDI Software being
treated as an unpublished work. Licensee further acknowledges that the EDI
Software, including any derivative works, is treated by Licensor as secret and
proprietary information of Licensor of substantial value, and Licensee shall
treat such information so received in confidence and shall not use, copy,
disclose, nor permit any Licensee Personnel to use, copy, or disclose the same
for any purpose that is not specifically authorized under this Agreement;
provided, however, that such covenant shall not be interpreted to prohibit
Licensee from retaining reputable expert third-party entities to maintain the
EDI Software and from disclosing to such entities such information as is
necessary to allow them to maintain the EDI Software, so long as such
maintenance entities shall undertake in writing to observe all applicable
restrictions set forth in this Article IV with respect to such information as
may be so furnished to them by Licensee.
4.2. Secure Handling. Licensee shall require that the EDI Software, to the
extent not installed on the Licensee Equipment, be kept on the Licensee Premises
in separate, secured drawers or cabinets, which shall be maintained in a manner
so as to reasonably preclude unauthorized persons from having access thereto.
Licensee shall permit such drawers or cabinets to be open to access only as
necessary for Licensee's use thereof for the operation or maintenance of the EDI
Software. Licensee shall identify each copy of EDI Software with a unique number
and shall maintain a written log indicating the exact physical location of each
such copy.
4.3. Proprietary Legends. Licensee shall not remove any copyright notice or
other proprietary or restrictive notice or legend contained or included in any
material provided by Licensor, and Licensee shall reproduce and copy all such
information on all copies made hereunder, including such copies as may be
necessary for archival or backup purposes.
4.4. Obligations of Parties Having Access. Licensee shall limit use of and
access to the EDI Software to such Licensee Personnel as are directly involved
in the operation or maintenance of the EDI Software by Licensee. Licensee shall
use its best efforts to (1) disclose such materials only to Licensee Personnel
whom Licensee has no reason to believe are untrustworthy or may violate the
provisions of this Article IV or the provisions of any Licensor Restrictive
Disclosure Agreement executed as referred to in this Article IV, and (2) prevent
all Licensee Personnel from having access to any such information that is not
required in the performance of their duties for Licensee; provided, however,
that Licensee shall be permitted to convey the same to maintenance entities in
accordance with Section 4.1 hereof.
4.5. Assistance of Licensee. At the request and expense of Licensor,
Licensee shall use reasonable efforts to assist Licensor in identifying any use,
copying, or disclosure of any portion of the EDI Software by any present or
former Licensee Personnel in any manner that is contrary to the provisions of
this Agreement, so long as Licensor shall have provided Licensee with
information reasonably justifying the conclusion of Licensor that such contrary
usage may have occurred.
4.6. Rights to Injunctive Relief. Recognizing and acknowledging that any
use or disclosure of the EDI Software by Licensee or Licensee Personnel in a
manner inconsistent with the provisions of this Agreement may cause Licensor
irreparable damage for which other remedies may be inadequate, Licensee agrees
that Licensor shall have the right to petition for injunctive or other equitable
relief from a court of competent jurisdiction as may be necessary and
appropriate to prevent any unauthorized use or disclosure by Licensee or
Licensee Personnel of any such information and that, in connection therewith,
Licensee shall not oppose such injunction on the grounds that an adequate remedy
is available at law.
4.7. Limitations on Confidentiality. The restrictions set forth in this
Article IV respecting confidentiality of the EDI Software shall not apply to any
portion of the EDI Software that (1) is in or becomes part of the public domain
or (2) is required to be disclosed by Licensee pursuant to any order or
directive of a court or governmental agency of competent jurisdiction, in the
event that Licensee has furnished Licensor notice of such directive or order
prior to disclosure.
4.8. Licensor's Support Obligations. In the event the EDI Software is not
already installed on Licensee's premises, Licensor shall provide reasonable
assistance and cooperation to Licensee in connection with the installation of
the EDI Software on Licensee's premises. In the event that Licensor updates the
EDI Software within one year after the date hereof and Licensee does not desire
to receive the updated versions of the EDI Software, Licensor shall insure that
Licensee is provided access to and assistance for a period of one year after the
date hereof from Licensor's employees, who are skilled in and competent to
provide support in the version of the EDI Software licensed to Licensee
hereunder. If such employees are unable to provide a fix or otherwise adequately
respond to Licensee's support needs hereunder, Licensor shall provide Licensee
with the source code pursuant to a source code license agreement, if Licensor
has the right to provide such source code, for a period not exceeding one year
after the date hereof, so that Licensee can itself support the EDI Software.
4.9. Survival of Terms. The provisions of this Article IV shall survive
termination of this Agreement for any reason.
ARTICLE V
Licensor Indemnification for Intellectual Property
Rights Infringement
5.1. Scope of Indemnification. Licensor agrees to defend, indemnify and
hold harmless Licensee from and against any claim, suit, demand, or action
alleging that the EDI Software or any component thereof infringes a U.S.
copyright, trade secret, or any other proprietary right of any third party, and
Licensor shall indemnify Licensee against all costs, expenses, and damages
arising from any such claim, suit, demand, or action; provided, however, that
(1) Licensee shall have given Licensor prompt written notice of such claim,
suit, demand, or action; (2) Licensee shall reasonably cooperate with Licensor
in the defense and settlement thereof; and (3) Licensor shall have control of
the defense of such claim, suit, demand, or action and the settlement or
compromise thereof.
5.2. Licensee Remedy Upon Injunction of EDI Software Use. If a temporary or
a final injunction is obtained against Licensee's use of the EDI Software or any
portion thereof by reason of an infringement of a U.S. copyright, trade secret,
or other proprietary right, Licensor will, at its option and expense, either:
(a) Procure for Licensee the right to continue using the EDI Software or
(b) Replace or modify for Licensee the EDI Software or such infringing
portion thereof so that it no longer infringes such copyright, trade
secret, or other proprietary right, so long as the utility or
performance of the EDI Software is not adversely affected by such
replacement or modification and the EDI Software continues to
materially conform with the EDI Software Specifications.
5.3. Exclusion of Liability. Licensor shall have no liability to Licensee
for any infringement action or claim that is based upon or arises out of the use
of the EDI Software or any component thereof in combination with any other
system, equipment, or software in the event that, but for such use, the claim of
infringement would not lie.
5.4. Exclusivity and Survival. This Article V sets forth the exclusive
remedy of Licensee against Licensor with respect to any action or claim for an
alleged patent, copyright, or other proprietary right infringement by the EDI
Software or any component thereof, and this Article V shall survive any
termination of this Agreement.
ARTICLE VI
Termination
6.1. Termination for Cause. Either party may terminate this Agreement
forthwith at any time upon the giving of written notice:
(a) In the event that the other party fails to discharge any obligation or
remedy any default under this Agreement for a period continuing more
than 45 days after the aggrieved party shall have given said other
party written notice specifying such failure or default and that such
failure or default continues to exist as of the date upon which the
aggrieved party gives such notice so terminating this Agreement; or
(b) In the event that the other party makes an assignment for the benefit
of creditors, or commences or has commenced against it any proceeding
in bankruptcy, insolvency, or reorganization pursuant to bankruptcy
laws or laws of debtor's moratorium.
6.2. Cure. A failure or delay in performance by either party under this
Agreement shall not constitute basis for termination of the Agreement under this
Article VI if such performance is effectively commenced or completed prior to
the giving of notice of termination.
6.3. Termination of Licenses. Upon termination of this Agreement for any
reason, all licenses granted hereunder shall terminate and Licensee shall
immediately cease use of the EDI Software. Licensee shall, immediately upon such
termination, return to Licensor all copies of the EDI Software. Licensee shall
certify to Licensor that it has retained no copies of such EDI Software.
ARTICLE VII
Miscellaneous
7.1. Notices.
All notices, demands and requests under this Agreement shall be in writing
and delivered by hand, by private courier or by telecopy, to the following
addresses (or to such other address as a party may designate by notice
hereunder):
IF TO LICENSOR:
Consolidated Natural Gas Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000-0000
Attn: __________________
Facsimile: _______________
IF TO LICENSEE:
Virginia Natural Gas, Inc.
0000 X. Xxxxxxxx Xxxxx Xxxx.
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: __________________
Facsimile: _______________
7.2. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia, without resort to the
conflicts of laws rules thereof.
7.3. No Assignment. Neither party may assign this Agreement without the
written consent of the other.
7.4. No Waiver. The failure of either party to insist upon strict
performance of any of the terms or provisions of this Agreement, or the exercise
of any option, right to remedy contained herein, shall not be construed as a
waiver of any future application of such term, provision, option, right or
remedy, and such term, provision, option, right or remedy shall continue and
remain in full force and effect.
7.5. Entire Agreement. The terms and provisions of this Agreement
constitute the entire agreement between the parties with respect to use and
reproduction of the Work and supersede all previous communications,
negotiations, proposals, representations, conditions or agreements, whether
written or oral, relating thereto. This Agreement may not be modified or amended
except in a writing signed by a duly authorized officer or representative of
each party.
7.6. Counterparts. This Agreement may be executed in any number of
counterparts, each full set of which shall be deemed an original, with the same
effect as if the signatures were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the date first written above.
CONSOLIDATED NATURAL GAS
COMPANY
By: _____________________________
Title: _____________________________
VIRGINIA NATURAL GAS, INC.
By: _____________________________
Title: _____________________________
SCHEDULE A
[Schedule A - List of all Licensee Equipment, i.e., CPUs, etc.
to be covered by Agreement.]
